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Some good news about the economy for once

Discussion in 'Sports and News' started by mustangj17, Oct 27, 2010.

  1. zagoshe

    zagoshe Well-Known Member

    Of course, if newspapers started shaming failed business owners, they'd have to start ripping their own publishers, who have been as disgraceful and inept as any bank, auto manufacturer or mortgage broker could ever hope to be.
     
  2. Crash

    Crash Active Member

    Exactly. The individual auto manufacturers are so intertwined with the other auto manufacturers through parts suppliers and dealerships that the failure of two of the three largest American manufacturers would have had dire consequences for Ford, Toyota and Honda, not to mention the hundreds of suppliers across the Midwest, not to mention the thousands of dealerships that depend on those products.

    While I don't know about Chrysler, GM got the shot in the arm it needed. It did away with the brands that were sucking the company dry, it focused on making better cars with better gas mileage and efficiency ratings, and it's currently putting out some very good products, particularly through Chevy. It used the bailout to become a better company.

    I think if the average American knew more about the bailouts, they wouldn't be so pissed off about them. The TARP bailouts have made money for taxpayers. Somewhere in the neighborhood of $25 billion, which means we got a better return out of TARP than we would have gotten through any Treasury bond. I don't think we need to be in the business of bailing out big companies when they fail with regularity. But when you're talking about the biggest banks and the two of the biggest corporations in the country all failing at once, well, that's what government is there for -- to protect the entirety of the country from calamity brought about by the decisions of a small group. TARP wasn't a perfect program. There wasn't enough discussion, there wasn't enough oversight, and it was basically rammed down our throats. But all in all, it hasn't been a terrible program. It saved an untold number of jobs and it made us money.
     
  3. Baron Scicluna

    Baron Scicluna Well-Known Member

    The big issue with the bailouts and the stimulus that have people up in arms is the banks that were supposedly dying, turning around and paying out millions in bonuses, some to the average worker, and a lot to the top brass, and not even pretending to feel bad about it.

    It's a much simpler issue that people understand instead of complex theories that they need economic experts to explain. I know I was pissed off when I found out these banks were paying out millions of taxpayer money in bonuses, then whining, "Well, if we don't pay them, they'll go to a different company."

    Nevermind that if it hadn't been for the government, there wouldn't be a company around to pay them any salary, much less a bonus, and they would have been competing with other unemployed workers for the same jobs.
     
  4. poindexter

    poindexter Well-Known Member

    I disagree with you, and many people do as well.

    http://finance.yahoo.com/tech-ticker/stiglitz-tarp-returns-a-%22drop-in-the-bucket%22-compared-to-damage-done-535544.html?tickers=XLF,SKF,AIG,FNM,FRE,BAC,C

    The banking bailouts go WAY beyond TARP. I think if the average American knew more about the bailouts, they'd be REALLY pissed off about them.
     
  5. poindexter

    poindexter Well-Known Member

    Yeah, and about all that bailout success:


    http://www.nytimes.com/2010/10/26/business/26tarp.html?_r=1&src=bus...

    Treasury Hid A.I.G. Loss, Report Says

    The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

    “In our view, this is a significant failure in their transparency,” said Neil M. Barofsky, the inspector general, in an interview on Monday.

    In early October, the Treasury issued a report predicting that the taxpayers would ultimately lose just $5 billion on their investment in A.I.G., a remarkable outcome, since the insurance company was extended $182 billion in taxpayer money in the early months of its rescue. The prediction of a modest loss, widely reported as A.I.G., the Federal Reserve and the Treasury rushed to complete an exit plan, contrasted with an earlier prediction by the Treasury that the taxpayers would lose $45 billion.

    “The American people have a right for full and complete disclosure about their investment in A.I.G.,” Mr. Barofsky said, “and the U.S. government has an obligation, when they’re describing potential losses, to give complete information.”
     
  6. nmmetsfan

    nmmetsfan Active Member

    Personally I would agree with you. If it were my business, I would. I'm just not naive enough to understand that big business has been playing by a different set of rules for as long as I've been alive.
     
  7. WriteThinking

    WriteThinking Well-Known Member

  8. Crash

    Crash Active Member

    I'm not going to argue with Joseph Stiglitz on economics. As I said earlier, I could be completely wrong about the bailouts. I really don't know. I will always think the auto industry bailout was a good idea because the potential effects of letting GM and Chrysler collapse are pretty well-documented. But I'm not educated enough on economics to know what we could have done alternatively on the banking issue.

    The $25 billion return number came from an article on the government report I read several days ago. Your article makes it seem like a much different story. But even what Stiglitz seemed to be advocating for in that video, which was government assistance and incentives to help the big financial firms reorganize, doesn't sound like anything that would have pleased the "anti-bailout" crowd any more than the actual bailouts did.

    Again, I'm not an economics expert, but it seems fairly evident that the government had to step in and play some role to keep our economy from going completely belly-up.
     
  9. Bob Cook

    Bob Cook Active Member

    OK, point by point:

    1. WRECKED CREDIT

    Your credit is going to be wrecked anyway if you're on a path to not being able to pay your mortgage. Bankruptcy attorneys will say that the problem with when people file for bankruptcy is that it's always too late. Yes, I know, they're biased, and all over my TV. But the point is that you'll be better off in the long term jumping out when you're starting to circle the drain, not when you've already gone down it.

    2. DIFFICULTY GETTING A MORTGAGE

    Again, if you can't hold onto the one you have, getting another one later is hardly a priority. Plus, if the rule of thumb is to rent assets that decline, buying a house right now would seem to be a pretty dumb move. Especially if you're at a point in your career where you know you're going to have to move to advance.

    3. TAXES STILL DUE

    They would be due if you kept the mortgage. I would think this is a warning to people to say that you won't walk away without immediate liability.

    4. DEFICIENCY JUDGMENT

    The article points out that in some states, lenders can't take any other assets. I guess it depends on your state, and your contract. And whether you actually have any other assets.

    Interesting link off that story -- a calculator to determine whether it's in your interest to walk away from your mortgage:

    http://www.payorgo.com/
     
  10. doctorquant

    doctorquant Well-Known Member

    Put options and mortgages are contracts entered into freely between self-interested parties. Each party enters into the contract aware of the contingencies, and these contingencies are factored in in the pricing of the contract. Each party is aware of the other party's future rights and obligations. Exercising your rights under the terms of these contracts speaks nothing to your character. What does speak to your character is your desire to change the terms of the deal post hoc. This is true whether you're the bank (or debt-holder) wanting someone to cover the cost of your mis-pricing, or you're the debtor failing to (or being unable to) live up to the deal but wanting someone else to spare you the consequences.
     
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