Servers buckle as Congress rejects $700bn Wall Street bailout Following the US House of Representatives rejection of a $700bn the financial bailout bill and the ensuing stock market carnage, it's easy to overlook the unspoken victims of today's Wall Street meltdown. We're referring, of course, to the machines running the House's official web site. Millions of individuals seeking …
Bottom line is this decision probably saved the US from blowing the last of it's money on the idiots that got them into the mess in the first place. Think about it, is it really the best idea to give $700 billion to the incompetents that invested everything they had into mortgages for the homeless?
That is their plan to save the US from recession and economic disaster? I reckon that pretty much anyone about to comment could think something that might work a bit better.
Like, say, investing $700 billion into rebuilding the nation's infrastructure, thereby recreating a shit load of jobs, thereby creating a shit load of income, that could actually be used to repay some of this debt.
Maybe if the war in Iraq hadn't got the US about a trillion dollars in debt already, handing out $700 billion to the geniuses that approved all those loan applications wouldn't be too catastrophic. But there really is only so much money the Chinese will hand over before they foreclose on the US.
Interesting really. They didn't even need to send a single soldier into the country, and they already own 99% of it. The funniest part is the US doesn't even realise who owns them. Probably not even the President that sold his country to the Chinese in the first place. And all because he wanted to play soldiers.. ah well, easy come, easy go.
OK.. this was the first I'd read the bailout got rejected.
A) I'm glad these guys that fantastically mismanaged money are not going to just get bailed out with my tax money.
B) Hopefully it doesn't collapse the economy.
C) At least the site is just slow and not dead. I certainly give more props to a site that slows down under load than one that goes straight from fast to dead.
Wow, this is the best infrastructure attack I've seen since the sulfnbk.exe hoax alert attack in 2001. E-mail servers slowed to a crawl and stopped functioning due to the fear of a fake virus.
Ironically, it's not unlike the panic on Wall Street itself. Panicky investors selling off, and panicky users hammering web servers, melting down both infrastructures at the same time.
Mine's the bear skin one with the stone knives in the pockets
address the disease not the symptom...
the market is crashing itself, don't try to stop it.
best case scenario after a bailout, you get a lame version of exactly what came before and hopefully it won't crash.
best case scenario without bailout, the market eventually fixes itself and is actually healthy... but who really wants a healthy market?
Alough the system is not perfect remember the financial sector has driven growth in the economy for the past 30 years or so, given alot more growth to the economy than $700b.
NOT providing this money will cause more than $700b worth of damage to the economy so all things weighed up they should have 'invested' the money.
I bet they would. It' s money that's not gonna end up in their pockets. The bill was rejected, and it's bad because people -and the (mis)management types first- might understand that they may some day have to cope with their dumbness by themselves and that they need to grow up. And this very day, as a side effect,MS sales might dramatically collapse.
Joke aside, and though I don't really give a shit because it's not my money anyway, I'm glad this pile of cash was kept out of the reach of the fat pigs. But I'm sure the now homeless real victims (yeah, they've been gullible, but still victims) would know what to do with this kind of cash. Not that anyone in charge would ever think of that. Just saying.
I'm sure if the waters above K-tulu were agitated, Redmond would issue a press release arguing for expedited wakeup procedures. The mad, soulless and gibbering masses left after the passage of the Tentacled One would certainly increase the marketing segment for Windows.
They should stick to what they are good at. Oh wait.
The scary thing is that I can't find a hole in the arguments..
http://www.huffingtonpost.com/david-bromwich/cheney-components-of-the_b_129222.html.
[I'll just show you the into, go to the website for the rest]
A sudden catastrophe, threat of a worse disaster if an exorbitant solution is not adopted immediately and exactly as requested, and the requirement that emergency action be subject to no supervision or check by a higher body. In short, a plan for a policy that changes the future of the country and yet is unaccountable and exempt from all opportunity for review.
Where has this happened before? Let us name just two. The September 11 attacks followed by the "permanent emergency" laws of the Patriot Act. And the nuclear Iraq forgeries and planted rumors to jolt the August-October 2002 debate on the authorization of the Iraq war--an authorization that exempted the president and vice president from future consultations with the Senate. But let us not forget the secret adoption [..]
The aim is to augment a real with a threatened catastrophe and so again achieve an immense consolidation of power.
America has tried that, remember? Hydroelectric projects, the highway system, the roads that nowdays connect the Florida keys to the mainland, etc. All these were done via FDR work camps in the wake of the Great Depression. It is questionable if these have had any effect on salvaging the economy.
They kept the USA afloat, but they did not produce any significant economical net gain. In fact the USA economy got out of the slump because it was put on war footing. So USA should probably thank the Japanese for Perl Harbour. Same for Germany under Hitler by the way. It is not the work camps that made the difference, it was moving the economy onto war footing around 1936-1937.
If we compare that to countries that did not take such a radical route like France the USA/Germany results were not any better. In fact, France (and the rest of the world) which did not marshal one quarter of its working population into work camps to "rebuild the infrastructure" recovered economically before Germany and USA. They climbed out to their pre-depression figures by 1937, while USA and Germany where still way below the pre-depression figures.
Just look at the actual figures from those years and interpret them yourself (not through "we love FDR" rose tinted glasses). They say very nice, loud and clear: "Communist methods aka 'rebuild the infrastructure' do not work!".
So let me get this straight.....the plan was to use a shedload of taxpayers money to bail out a bunch of mismanaged companies? These companies lent out other peoples money to various parties purely out of the chance of making a profit. If any retail company made the same mistake (which I'm sure some do) then they'd just be forced to handle it or go bust, but these multinational financial institutions which make billions of dollars a year profit need a helping hand?
Ok, sure, bail them out but on the condition that they cannot make a penny profit until their debt has been repaid. Then if/when the economy sorts itself out, we won't have them gloating about how much profit they are making knowing that they are only still in business because we (the taxpayer) bailed them out.
As for the stock market, it's pretty much the most greed-ridden place on the planet and now they're all shitting bricks. I guess this is the downfall of a virtual economy, where actual physical assets are no longer the measure of a companies wealth or value.
How'd that $168 billion fiscal stimulus package work out, the one where you all received rebate checks paid for with borrowed money? Did that work? Or the 2004 tax cuts paid with borrowed money, or the 2000 one?
I told you so.
The $700 billion bailout was just another injection designed to defer the problem. I'm glad it was rejected. You first need to get Bush and co out of office before you can fix anything.
It sucks that European banks bought some of this crap bank mortgage bonds, but we'll survive.
Why do people keep referring to this as a free handout? They're going to 'buy' the high risk mortgages from the banks to instill confidence in the market and allow it to then recover on it's own. Now, they're not just going to pay full price for that $700 billion worth of sub-prime mortgages, they'll get them at a reasonable rate (if not then they're idiots... but we have to keep some faith that they have more than 2 braincells).
This, combined with setting up legislation to make sure the financial industry is more regulated and basically doesn't allow itself to get into this state again could mean the economy has enough steam to start saving itself.
My predictions:
If the 'bailout' doesn't go ahead, we're going to see a worldwide financial market collapse (think it's already collapsed? We've seen nothing yet!). Within 2 years we could see a big change in world powers. Will China control world financial markets? Who knows!
If the bailout goes ahead, we can look at a small boost to the economy (although this will just be a boost from the recent sudden fall, so more of a smoothing out than a boost). We'll then be looking at 2 years of gradual regrowth. More cautious markets will make far less profits, but they will generally still be growing. Insurance policies will replace high-risk investments, or rather go hand-in-hand with them to reduce the risk. We should be looking at lower interest rates within 2 years.
Then again, I'm a low paid developer with no financial experience whatsoever, so you may as well listen to any advice Paris wishes to dish out :D
...I'm sure everyone feels much better about the bail-out plan.
Seriously, though, the lack of cash is caused by a lack of trust between banks, and *that* is caused by the fact that no-one knows how much their paper is worth. Slowly, though, as banks fall over one by one (worst first) it will become apparent who is holding the toilet tissue and who has something of real value. There's nothing fundamentally wrong with the economy, *unless* some fool decides to blow a trillion dollars bailing out their cronies.
I note that central banks pumped 620 billion into the markets yesterday alone, an appreciable fraction of the amounts being discussed in Congress, and Wall Street responded with a massive dive. Hmm, maybe cash isn't the answer. Maybe cash isn't the problem.
No, what the market needs is accurate information, valid accounts, that sort of stuff. Once it has it, confidence will return. Not because the bad debts have gone away, but because everyone can see where they are. That bad debts will stay, and hopefully ruin the fools who brought them into being, rather than the poor suckers who were conned into taking them out. Congress should legislate for the publication of proper accounts by the loan sharks on Wall Street who think they can hide their crimes behind systems of partial differential equations.
If the banks don't gain confidence they wont lend money and will become increadingly aggressive in getting money back.
If banks don't lend money companies that rely on borrowing upfront to purchase something to sell will fold. A good example is Electricity providers (not generators) who borrow money to secure power upfront so that they then sell power to the customer at a consistent price. I'd suspect a vast number of other industries do this (buying raw materials/components/equipment on credit and getting good rewards over the long term.)
If banks reclaim money more aggressively more properties will be repossessed and more organisations will need to declare bankrupcy.
If more businesses go out of business more people will become unemployed. More unemployed people means a bigger welfare bill. Also it means less people (and companies) spending, paying tax and exporting. Which leads to further downturn, less confidence, more bankrupcy, less taxes. Well you get the picture. That of course is the worst case scenario.
When the same happend in Japan a few years ago the government dropped interest rates to 0, and bought up all the toxic debt, in return the banks had to declare everything and become transparent.
The end result, some really hard years for the Japanese financial secter - however no banks collapsed and the economy grew. Also the toxic debt became profitable and the Government turned a nice profit. Now the Japanese banks are cherry picking around the world.
Shows what can happen when you make hard decisions.
"Why do people keep referring to this as a free handout? They're going to 'buy' the high risk mortgages from the banks to instill confidence in the market and allow it to then recover on it's own."
Because those assets are worthless. No income no job mortgages can never be paid back, and without the inflated markets there are no buyers with money to pay for those assets. No other investor wants to buy those assets, not at any price, long term or short term.
If you were a bank that bought those, well tough luck. Other banks didn't.
If you feel they're worth something, well the banks can package those bonds for sale to the public and you can buy them. People who bought Pets.com shares as they dropped are rolling in money now,.... oh wait, they lost their money. Tough!
"If the 'bailout' doesn't go ahead, we're going to see a worldwide financial market collapse (think it's already collapsed? We've seen nothing yet!). Within 2 years we could see a big change in world powers. Will China control world financial markets? Who knows!"
Tescos made more money you know, people need food. Oil companies are high, people need oil, gosh you know what, I reckon the world will be just fine. Chinese don't have a tradable currency, they use $ for their exports so their future is tied to how the $ does in terms of real world goods like oil.
When I said "I note that central banks pumped 620 billion into the markets yesterday alone" I may have given the impression that all that cash was actually available yesterday. That was indeed my own mis-apprehension as I browsed during breakfast.
http://business.timesonline.co.uk/tol/business/markets/article4844255.ece
Turns out the cash was merely promised, which makes it about as secure as the $700bn would have been, but I think my point still stands. Plans and promises to make vast amounts of cash available are *not* helping, because no-one actually knows how much bad debt there is, so no-one knows how much cash is "enough". What needs to happen is for banks to publish their positions. We can either do this the easy way (let them go under and wait for the administrators to report) or the hard way (get our politicians to grow up for long enough to pass and enforce legislation making this information public).
My opinion, now I thought about it and pushed away the media-instilled panic on the issue, I think that the folks who got stinkingly and unbelievably rich on the back of all the messing which led to this sorry juncture should pay the necessary money out of their OWN POCKET. After all the money they made is, in effect, our money, they should give it back.
The sad part of it is, should the worst come to the worst, these people, the big fat cats, won't suffer too much but us little people will, make them fulfil the sacred trust they took on by taking our money in the first place....
either that or, when things do go bad, we should go to their houses and take stuff, it is ours afterall.....
The US economy, as it stands, will collapse in on itself. The first and foremost to go under will be banks engaged in lending money to people/companies who should have never have been given that money. Once those are gone, you'll see a collapse of companies that attempted to make money off the banks involved. The result will be a significant reduction in the overall US economy, a big cut in their GDP and as a result, a rapidly declining dollar price.
Some European financial instutitions that put a lot of money into the stupid US banks will get pulled down with them. The rest however will find that oil prices plummet (the US after all no longer has the money to throw at wasting lots of oil, oil demand will go down), overall speculation on oil prices will decrease, companies relying heavily on that speculation will go under.
Most of us in the EU will however find that energy and fuel prices will finally drop for a change. Many commodities and food will decrease in price, while unemployment figures will rise a little, but most of the employment will be the people that previously made big fat profits, mostly people who will, within a few years when the worst of this all has blown over and the EU financial market starts to climb again, be able to get a new job if they were competent.
One of the minority sensible posts here. If this all goes bad, it'll make 2/3 of a trillion look trivial. All the bleating of "don't want" - be careful what you ask for, cos you might get it, and the way things are looking you possibly will anyway. And it'll hurt.
As for slowing servers, can't they just make the docs moderately small (strip images) and cacheable then let squid do the rest? I mean, isn't what all the cacheing directives in http are for?
Dont ya just love it when fat cats begging for handouts, refer to it as "legislation".
I thought the whole idea of capitalism was that great rewards went to those who take sometimes great risks. They sure like the rewards and keep it to themselves, but now they want Joe Lunch bucket to assume thier risk, while they go off and count thier villas.
No, No, and no again to any bail out.
I would at least have expected some reg readers to have a clue. The rejection of this bail-out is one of the most foolish things that a government has ever done. Do you know what happens when a bank collapses? All the little people (yes you) lose lots of money. When Lehman collapsed, you know who lost money - your pension fund did. They have money in prime brokerage accounts that will be locked up and only released after bankruptcy proceedings are complete, so you all lost a lot of money.
The interesting thing about the bail-out is that it would have actually resulted in a profit for the US Government. The instruments that they were going to buy are not actually worthless. They have some intrinsic value once this whole mess plays out. The only reason they appear worthless at the moment is because some banks who were in trouble had to have a fire sale, and sold a bunch of similar products at knock-down prices. Because these products change hands rarely, and because banks are legally required to mark-to-market (ie value the products at the last price in the market effectively), everyone is having to undervalue the contracts. The US Government will buy at the undervalued price, and have a hefty profit in 5-10 years' time when they sell. The banks want to sit on them, but mark-to-market is stopping them making the profit at the moment. Not only that but the package actually had a guarantee that if the government lost money, the banks would have to reimburse them in 5-10 years' time. So overall the US Government was in a win-win situation.
Think of it in this way. Let's say you live on a housing estate. Your house is valued at £100,000, just like all the other similar houses around it. But the average house is taking 6 months on the market before it goes. Then someone dies and the house has to be sold immediately for death duty reasons. Because the seller can't afford to wait 6 months for a sale, they shift it at £50,000 to get it off the books. Is your house now worth £50,000. According to the mark-to-market rules the answer is yes. The reality is, if you want to sell, and are willing to wait the 6 months to effect a sale, you'll get the same old £100,000.
You obviously don't have a clue yourself. The UK housing market is the most over inflated in the world. the economy has not been growing at a rate that would make 100% house price rises in less than 10 years sustainable. This has to a large extent been driven by the greedy bankers loaning money to people they shouldn't, reducing the available housing and forcing prices upwards. If a house costs £100000 now you can pretty much bet that its ACTUAL value is around 50-60k. So all these commodities you seem to think will be worth the same once the trouble is over are in reality worthless.
I'm betting the housing market in the US is in about the same state and it will be a long time before things actually start to balance out, never mind start to climb again.
As for 'The US Government will buy at the undervalued price, and have a hefty profit in 5-10 years' time when they sell.' you fail to take into account
a) how much further prices will fall (and they will)
b) how much maintenance will cost during those 10 years (if you don't keep it in good order the price will fall further)
c) The ability of people to pay rent on those properties. recession = lower employment = able to charge less for rent or risk having the house stand empty = more for you to pay in maintenance
d) The tax that must be paid on those properties - even if the government owns them. If they make them tax free, the hard working people still paying tax on their property will revolt.
As for the pensions, in the UK pension funds are regulated under a much stricter set of guidelines than investment funds and despite 1 or 2 high profile cases (e.g. Robert Maxwell and the Mirror fund) very few people have ever lost money when compared to the amount of people that pay into a pension. We also have the Pension Protection fund to help those unfortunate few who really have been screwed over by the companies they worked for. Maybe it isn't the same in the US, but you can blame the government for that as most of their policies are designed to help big business and the rich with very little provision for the actual workers.
Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."
At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality.
Follow the money. Average Joes and Janes are not the holders of the other side of complicated, over-the-counter derivatives contracts. Rather, hedge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.
Rescuing financial institutions is not the best solution. Yes, banks are needed to provide capital to businesses. But it is not necessary to spend $1 trillion to maintain liquidity. If the government is to intervene, it should pick and choose which claims to purchase; claims that are directly tied to mortgages would be a good start.
So I stick to the point I made in the first post. Wasting what little money we have available on the national credit card by giving it to the incompetent fools who blew the money of investment banks is not the way to fix this crisis.
Maybe you don't like the idea of building infrastructure, but in today's world infrastructure does not necessarily mean roads and bridges. It could be used to give $15 billion to every State to overhaul it's communications. Ripping out the copper and replacing it with fiber. Besides the re-employment of tens of thousands of engineers, the industries that support this kind of thing would boom as well.
The jobs created in manufacturing and construction that would be required to support building such a network would also be high paying jobs. It would put the US back on the technology map, because the upgrade to the internet alone would be something innovative technology companies could make good use of.
I still hold that this is a somewhat more viable plan to pull the US out of recession, rather than giving $700 billion to a few useless idiots that put all their banks' money in hedge funds and other high-risk investments - like mortgages for the homeless.
As for credit, well it's up to these banks really, but if their business is to make money from lending, not doing so will mean what? They no longer are in business? I'm sure other lenders will be more than happy to buy them out and take over their market. In fact I think you'll find that's exactly what's going on right now.
First you have potential home buyers who don't have enough money for a proper down payment and can barely make ANY monthly payment.
Then you have crooked home appraisers who are saying 40K homes are worth 80K and get a "loan arranger" to fix up a loan on these premises (and the load arranger gets a cut off the top).
Then you have loan writers at the banks who are pressured to make the loans based on falsified loan papers provided to them by the sellers, arrangers, and buyers.
Then the bank (in a move which should be outlawed) takes a stack of these shaky loans and packages them and resells them. Another sleazeball at this point cuts these up into pieces and sells off the various pieces based on the lie that they are good paper and there will be wonderful returns on them.
Then you get more sleazoids who buy this crap paper and pass it along again as if it really had something behind besides the premise that it MIGHT be worth something.
Then it all starts crashing down and they want US to bail them out of their crooked, stupid, greedy, illegal activity.
Ever hear of fiduciary duty boys and girls? it exists at ALL levels of this pyramid and has been consistently and persistently ignored. There should be people every level of this GOING TO JAIL and having their assets taken to pay for the mess. This should not (any more than the savings and loan scandals of some years back) become the debt of "the people" because of the misfeasance and malfeasance evidenced here.
If I HAD money in any of this, I can't be any worse off losing it than throwing it down a rathole in bailing these bastards out of their mess. Start rounding them up for prison time and THEN i'll think about LENDING them some of MY money. Someone(s) somewhere has made a tanker full of money out of this and now gone skipping off to skim someone else of their hard earned lucre. ENOUGH ALREADY.
The banks are already sitting on 2% money from the FED and aren't loaning out a damn dime while charging usurious interest on home loans (compounded interest) and on credit cards (high rates left over from raised limits back when) and in general raping the hell out of the public at every turn (and opportunity).
Even the rip-off payday lenders aren't this bad (well, they really are, but i'm just pissed off at this bunch of crooks this time around). The payday lenders should all be put to the sword, too.
Amazing how the same guys who want a totally free and unregulated market when they can make big bucks out of it are suddently crying for public money when their own stupidity puts them in the shit. Yes, I'm looking at you, MS, and also at you, the 2 or 3 wannabe-pigopolists commentards.
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