9/26/2008 10:51:28 AM #

Just a thought - McCain should put out another ad with that "3:00 AM motif" showing a phone NOT ringing at Obama's headquarters!

By the way, will this result in ANOTHER bill with McCain's name ON IT, and WITHOUT Obama's???!!!

I'm curious: was Obama the only junior senator at the big meeting last night? Meaning that he was invited out of courtesy as a presidential candidate? ...'cause he would not be offering any solutions!

Irma M Vasel

9/26/2008 12:06:33 PM #

What is very frustrating to me is that you have Sen Dodd, Congressman Frank, and Pres. Bush proposing solutions to the mess that they had a HUGE hand in creating.

SDP

9/26/2008 12:33:02 PM #

That is some very sage advice from The Hitchhiker's Guide to the Gallaxy, "Don't panic!"

I have come to the conclusion that modern US politics has devolved into a series of mind games playing on our fears.

We fear that without a bail out our economy will tank and everyone will lose everything.
Many are voting for one Presidential candidate because they fear what will happen if the other wins. (fear of increased taxes, fear of war, you name it)

Another great quote is from Men In Black, "A person is smart, but people are stupid." When you get a group of people together and discuss the economy or politics or religion emotions flare, yelling ensues and stupidity prevails. But if we would all take a moment to be an individual, to set aside emotion and look at things from a logical perspective and weight the facts instead of the drama fed to us by the media outlets we could all start making smart decisions.

I hope the members of Congress and leaders of the financial industry can stop being a group of people and think like individuals for a little before blowing $700 billion of our money.

T with Honey

9/26/2008 2:52:53 PM #

This bailout needs to be simple and transparent.

There are many flaws with forcing these companies to accept money by providing preferred stock. Not every institution is actually a public company and organized in a way that would even permit this. More importantly, this would be the very "socialization" that I would expect you to want to avoid -- I certainly do. By making the government the principal owner of these companies, you are essentially turning them over to the federal government to operate. Lastly, just as this would create a new set of "more-preferred" stock, in the future these companies could issue "yet-more-preferred" stock. It would require extremely complicated legislation to even make this work.

There is an enormous problem with any bailout scheme in which the government does not purchase the mortgages/MBSs -- it won't work. By failing to be willing to buy these assets, the government is telling the markets and the world that these assets are utterly worthless. It would simply be a case of good-money-after-bad to give these companies billions of dollars to keep their doors open while simultaneously rendering these assets even more worthless.

The government must buy the mortgages. This keeps the government from controlling these companies -- from socialism. It's transparent and simple and clean. The only real question should be price.

The government must pay more than "market value", because market value is presently "nigh-worthless". In order to establish confidence, the government has to send the signal that these properties are worth more than "nothing". But, obviously, they should not pay so much for these mortgages that they waste money.

If the present market value for a $200,000 mortgage is $20,000, and the government pays $24,000 (25% above market value), then there is every chance that they will eventually collect the full $200,000 for that mortgage, or else sell the property for at least $24,000. So we'd either make money or break even. Worst case? If a $200,000 home sold for $20,000, then we'd be losing 7% of the $700 billion -- which isn't great, but it's hardly a disaster. If a $200,000 house sold for $10,000 -- virtually unimaginable -- we'd lose about 58% and still get about $300 billion back.

So what people should be talking about is the same as with every investment: how much will we pay?

John