After the BailOut – Can the Bankers Who Caused the Mess Fix It ?

The bailout is a given. Its needed to introduce liquidity into the system. I wonder why no one is defining what happens after the 700B of mortgage and other assets are purchased by the Fed.

Has everyone forgotten that we didnt trade in last year’s bankers for a new team. The bankers that we hope will reflate the economy with loans to the people and companies who need it ARE THE SAME BANKERS THAT GOT US INTO THIS MESS. These are bankers that dont know how to bank the right way .

Not only are they the same bankers, but they now work for companies in an industry that has been completely turned upside down. WHAT MAKES ANYONE THINK THEY ARE ACTUALLY GOING TO MAKE LOANS TO MAINSTREET CONSUMERS ? What makes anyone think they are going to set standards that any normal American can meet, and then actually loan them money at terms they can afford ?

They wont. No chance, no how unless the Fed sets standards that makes them lend to Mainstreet America

You heard it here first. If the BailOut has not requirements for how the money is used, this is how its going to go down:

1. The Bailout Hits. Euphoria on Wall Street. Stock Market goes up.

2. Banking Balance Sheets improve, Banks of all types say the problem is solved. They loan money to their biggest corporate and very rich clients. They have to, they dont want to lose their business. Of course, those corporate and rich clients borrow as much as they possibly can because they dont know when and if credit will dry up.

3. Wall Street Analysts say they are optimistic that retail sales will be stable with last year, and possibly even up as consumer confidence has shown increases

4. We start to hear complaints from consumers and small businesses that loans are not available to them , or when they are, the terms are unreasonable.

5. Dec sales for retailers are below last year and below analyst expectations. Retailers say its due to lack of credit availability to consumers.

6. Mortgage default rates start to increase

7. Stocks fall hard

8. The Treasury Department says it underestimated the amount of money that needed to be pumped into the system in order to create liquidity for MainStreet. They announce they will use the ANTICIPATED profits from the 1st bailout to fund the next 500B of bailout

9. They time the 2nd 500B “investment for the taxpayers” to be on the 101st day of the new administration.

10. The Recession grinds on and on and on

Bottom line is this. If the 1st Bailout doesn’t set standards for allocation of proceeds so that corporate clients dont consume all the liquidity from the BailOut, those corporate clients will consume all the credit. They would be stupid not to try and take all the credit extended to them.

In addition, there must be credit standards set so consumers know what will allow them to qualify for loans (assuming there is any cash available for consumers) . The last thing we need is the redlining and redzoning of consumers. It may be 20pct down for a home and a given credit score. 10pct down for a car and a minimum credit score. But there needs to be some minimum standards so that consumers know if they are being taken advantage of, and banks feel the pressure to loan the money to qualified consumers. This needs to happen

I dont know why anybody thinks that the Bankers who got us into this mess are going to take 700B of taxpayer money and know how to loan us out of this mess. It makes no sense at all. We need to set standards for how the money will be used by banks

58 thoughts on “After the BailOut – Can the Bankers Who Caused the Mess Fix It ?

  1. Thank you for the summary .. we are doing lojistik and lojistik will be good in some years .. Some lojistik firms are good comme us

    Comment by lojistik -

  2. I think all of the contributors to this page need to read ” Modern Money Mechanics ” a book published by the Federal Reserve Bank.In this book it talks about how ” money ” works and how the bankers make ” money “out of thin air . The biggest question I have is if you loan air to someone and charge interest on it why are you not in prison ? The answer is of course ,your cronies in congress allow it because they benefit from it.

    Comment by Matt Aubuchon -

  3. They claim the Plan is to take the dead assets of the Banks Balance Sheets so they can make loans, but that may not be the truth, since I beleive the real reason the Banks cannot make loans is due to the fact that there are not enough people making middle class salaries and/or have too much debt and therefore cannot afford to get a loan, not to mention too many people have bad credit and cannot get a loan for that reason, and if they can, they are charged a higher interest rate, which they cannot afford and therefore do not get the loan. I say, if they are going to wipe the banks clean of their bad assets due to their predatory ways and their mistakes and misfortunes, then the Gov. should buy up the debts from the Banks for pennies on the dollar and only charge the debtor what they paid for it, including some nominal admistrative fee to cover the overhead of hiring people to handle those transactions, and wipe their credit records clean, so they can afford and be able to get a loan again. Then the Banks will start making loans again. I read that most people who defaulted on Mortgages could not afford them even if the rates were lowered or do not want the homes at this point. If this is the point. So they will not be able to pay the government what they want, and the government will acquire the home and take whatever other assets the debtor owns and sell them and make money. They may also buy the delinquent Cedit Card Debts; Student Loans; and Car Loans, for pennies on the dollar and go after those debtors for the whole amounts and get whatever they can and make a profit and if the debtor cannot pay it, they will take their assets and sell them and make money. I am afraid the we are in so much debt from the War and cannot borrow anymore from other countries, that the only place the Gov can get the money to fund the War and Banks, is to get it from their own people who are hurting. Most people are good and try to do the right thing and they default on mortgages and become deliquent on credit card debt due to the loss of a job; and illness; or some other misfortune, such as an emrgency repair to their home that is not covered by their Home Owners Insurance, or the loss of their home due to a disaster. If the Gov owns peoples debts they will become enslaved in debt the rest of their lives, and all options they will have to get out of debt, such as settling their debts for less than the full amounts; getting into an affordable payment plan in Bankruptcy; or having the good fortune of getting out of the debt due to the Bank not wanting to pursue them or since the Bank sold the debt and the bad debt buyers cannot prove they own the debts and the Statute of Limitations for collecting on the debt passes, will all be taken away from them. Thus permanently enslaving people. This will allow the Gov to succeed on having a Two Class State where they own you. Bottom line is the real problem is too much importing and NAFTA and GAP Treaties allowing companies to go over seaa. If we do not have plants and factories here and do not make anything anymore, you have no middle class anymore and that is what this countries problem is. For the majority of Households. two people have to work to make a middle class salary and if one loses their job, they have to default on their Mortgage. Most people also would not use Credit Cards if they had enough money. Get rid of NAFTA and GAP and stop importing so much and start building the middle claas again. With more jobs and more people making more money, more money will go into the Social Security System and will fix that problem. Also make it a law that companies have to offer pensions again. 401K and IRA’s and/or Social Security, will not do it for people when they retire, being most incomes in this country are below middle class and even if they were, is not enough to sustain a person in retirement and when they are too old to work.

    Comment by RS -

  4. Pingback: Quick Hits vol. VII « The WoodLawn Review

  5. Pingback: mark cuban for president « alex alexander

  6. The thing is Mark, the ploy was not about solving the crisis, but a political ploy to make it look like her cares. Senator Obama was on the phone with Sec. Paulson and Congressional leaders everyday prior to McCain’s “cry for a solution.”

    The way McCain just kind of gave up should be indicative enough.

    Don’t be so foolish Mark.

    Comment by Joe -

  7. The whole scenario has banks gun shy from lending. They will continue to try and preserve equity by not making loans and selling their illiquid assets to the government.

    Judging by the questions the Politicians are asking Paulson and Bernanke, it does not appear the pliticians fully understand the ramifications of this credit crunch…

    Comment by Harun -

  8. And forgot to mentioned that a lot of bankruptcy and forelosure lawyers are capitalizing on this situation plus unethical Realtors who make homeowners think that they’re doing them a favor by selling the property “Shortsale”. No disclosure that homeowners will receive a 1099 at the end of the year. This is what you call killing the dead!

    Comment by Esther-am sooo sick! -

  9. Sick to the stomach and nothing to throw up! I’m an immigrant who worked my ass off to saved and invested in RE. I did it the right way and never did ripped off anyone. Paid 20% down, good credit, fully documented and had a nest egg(I thought) of little less than a million. Now, it’s gone and am in the negative. Am still paying my debts especially mortgages on time and keep my tenants in the properties. I have to admit that I am tempted to walk away! The bankers are just doing their jobs. Well, I wish that the attitude change and we’d be more conscientious in doing our jobs. Jeff’s brilliant comment about banks, mortgagees, lending institutions as a whole realized that they had the opportunity to rectify the situation by being open to negotiations with the homeowners to convert those ARM to fixed rates. Some have 1st and 2nd with one institution and with government intervention (like what they’re doing now) they can save a lot of people and the bailout wouldn’t be as big as this. The scary part is that, this is not the ultimate solution. There’s some more coming! Commentary here from ordinary folks have more substance than the highly educated idiots up there.

    Comment by Esther-am sooo sick! -

  10. Very good points about the underlying problem of personnel. Another
    biggie no one is talking about is the over $8 trillion of derivatives
    that are now toxic and which are far more likely to bring the system

    One things for sure…the prudent banks and institutions with strong
    balance sheets stand to gain vast assets by gobbling up the companies
    who went for broke and 5 years from now the wealth gained by them and
    their stockholders could be called the ‘heist of the century’.

    Comment by alexander-social media guy -

  11. You can’t blame the bankers for getting us into this mess. They were just doing their job. Blame the Banks and the people who run the banks. I’ve been in banking for the past 3 years, you are told to sell loans to every idiot that walks in the door and the more you loan the more money you as a banker made. The banks just wanted to outloan eachother and their presidents didn’t have their heda on straight and got greedy and didn’t think that “hey, if we rip off a shitpile of people on loans then they won’t be able to pay it back” They figured a few houses would be auctioned and they’d be good like always. The fact is, it’s not the bankers fault for doing what their superiors told them to do. Just six months ago those same bankers were getting huge bonuses for doing this, We should be blaming the people who gave them those bonuses. They’re the ones who are responsible for all of this.

    Comment by Nacho Philosophy! -

  12. The government has been doing all these things to “influence” banks to lend. They cut the fed rate which didnt really help for long. They took over freddie mac and fannie mae. Again it didnt get banks to lend. Now they are giving 600 billion to the banks. But fundamentally banks might choose to still not lend. Then we have just wasted 600 billion bailing out a bunch of stupid banks who will probably do this to us again.

    Comment by Ki -

  13. Our country is $10,000,000,000,000 in debt already and we’re going to
    solve our debt crisis by spending another $1,000,000,000,000?

    Only in Washington can you spend your way out of debt.

    Good plan!

    Comment by Steve R -


    Comment by Dan -

  15. I don’t know Mark, I think you’re about half right. I mean yes the
    bankers will be gun shy to load Joe main street up to his eyeballs in
    debt again, however you ignore the actions of the big dogs once the
    credit markets are flowing again. It’s not like they’re borrowing to
    wallpaper their mansions with $100 bills, they’re borrowing to fund
    business ventures which means either hiring people or buying stuff,
    which means somebody else is hiring people. And those people will be
    out buying stuff, and if they’re not then the big dogs will curb their
    borrowing and the banks needing an interest margin will have little
    choice but to make loans. I’d argue that it’s probably worse to flood
    the consumer market with cheap credit in another attempt to spend our
    way out of the problem.

    Comment by Paul -

  16. Pingback: Bubble to Burst - Real Estate Assets or Securities? « Susie’s Kauai Real Estate Blog

  17. Here’s my proposal for an oversight board: T Boone Pickens, Carl Icahn, Bill Gates, Warren Buffet, Mark Cuban, George Soros. The success of this plan will depend on people like this who can read financial statements with lots of zeros and still recognize the baloney, who know how to hold executives accountable and who have a huge stake in the success of the plan.

    Comment by Jim in Keller -

  18. What you said in point (6) plus… There is a lot of foreclosure inventory sitting on the market at unrealistically high prices and terrible condition right now. It’s like there are two markets. One is the normal market and the other is the foreclosure market. When banks are able to take the losses that will clear the foreclosure inventory, they will drive prices of the normal market down and put more people upside-down in their homes, leading to more foreclosures. The outer bubble may have popped, but there is an inner bubble that’s pretty big too. Regardless of what the bailout does to unclog the credit drain, there is a big underlying valuation problem that can’t just be solved by fiat. Maybe by inflation…

    Comment by BoscoH -

  19. Point 1 on the list seems to have begun to occur.

    Comment by sampablokuper -

  20. You missed an important issue: Many of these bankers looked the other way when their teams were peddling garbage to pension funds and teachers unions, knowing full well that their roi may never come but their end of year bonuses were guaranteed. This form of soft crime really needs to end if we are ever to have a properly functioning wall street that doesn’t require, as a matter of routine, a bailout every decade or so.

    Comment by stone -

  21. Doesn’t a lot of this fall back on some personal responsibility by the
    BORROWER? I mean, I own a home, but its on a 15 year fixed rate mortgage
    that i CAN make the payment on. Sure the bank WANTED to loan me the money
    on an ARM or some 45 year note, but i know what my family CAN AFFORD. I
    think its time for those who borrowed to take a page out of Dave Ramsey’s
    book and work on getting debt free. The credit system we have sucks if you
    abuse it, with no regard for the fact that you are ultimately responsible
    to PAY THE MONEY BACK. Looks like we’re all about to pay for those who
    took advantage of a system that was too greedy to stop them from doing it.

    Comment by Chris Smith -

  22. Please excuse typos and grammatical errors of previous comments. It’s difficult trying to type think rationally and eat lunch simutaneously. (Gotta return to earning the $521)

    Thank you MC for the forum.

    Comment by Enor23136 -

  23. I think the thing that ticks me off more than anything is that the
    controllers of these companies spend millions of dollars trying new
    things at the risk of stock holders and the general public. What about
    small business owners like myself. If I make a bad decision there is
    no one at my door wanting to bail me out of my mess. I have to endure
    the entire weight of that problem for several years sometimes. I have
    been self employed for 18 years. Business has been pretty good for me.
    Does that mean I a really a good business person or I knew if I didn’t
    make sound decisions I would lose everything and have to start all over.
    That’s the problem with these companies. They make a mistake and they
    are rewarded. I think all major companies should be run by single
    mothers of three children. Have you notice that most of them can
    balance their life, balance their budgets when they make far less than
    most and their kids tend to be well mannered and appreciate what they have.
    I am not bitter, but I do believe that the large compensation packages
    to the guys that have ruined the company should be taken away. If
    a professional athlete doesn’t do something right they are fined. Hey,
    look at Mark Cuban himself being fined all that money for speaking
    truth. It’s one thing to waste money for a cause or to stand up for what
    you believe, but it’s another to just waste a companies money because you
    can. The bankers are at fault. They were looking for the easy dollar
    and it turned on them. They said let’s get all these loans, package
    them and sell them to investors. Well, it didn’t work. They got stuck
    with bad loans because the criteria that was used was way below what
    it should have been. Even in my business we extend a type of credit,
    but there are guidelines. So many people got loans on “STATED” income.
    Give me a break. No money down with stated income. Oh, yeah mr. banker,
    I make $608,000 at Taco Bueno. Great you got the loan. I am a real
    estate broker and I knew that 90% of the properties I sold the people
    couldn’t afford them. But, hey what can I do, they think they can
    and the banks give them money so here we are now. What this boils down
    to is accountability. So many of these guys are golf buddies and strip
    club patrons that they don’t have the guts to tell them they are doing
    something wrong. We think we got problems now. Housing, health care,
    stocks, electrical, you name it all of these categories have issues and
    it is catching up with all of them. It will take a miracle from God to
    eliminate the issues that we currently face before us. I am 43 and
    it gets worse, not better. If the government can’t control it’s debt
    and manage it’s own business, how does the average citizen ever have
    a chance. The only problem is if the government makes a mistake they
    say open wide to OUR wallets and if we make a mistake we are out on
    our own.

    Comment by brian -

  24. @ eddie

    You want the government to forgive credit card debt? I hope you are a
    9-year-old because if you are an adult you are exactly what’s wrong
    with this nation. Please tell me you are a felon and can’t vote.

    First of all, credit card debt isn’t help by the government to forgive.
    Secondly, who do you think the government is? a magical money tree?
    The governments money is our money. And I don’t want to payoff your
    credit card debt.

    Comment by David -

  25. I concur with the overall questioning posed by this blog, will a handout to failed companies and their leaders really save them and the economy. If so why is it so hard for me to get a government loan? True I’ve made some mistakes in my lifes journey, but I know beyond a shodow of a doubt that with a proper funding that my idea for a educational and training facility will be benecial to the lives of hundreds and eventually tens of thousands of employees and employers. But that’s not the reason I’m commenting. I want to ask where the accountability for this “bailout” lies. Are we saying that to the present leadership “Sorry you blew the opportunity to benefit all the people to whom you were responsible. Your golden parachute has now been used to try and save all those you misled, misguided, misrepresented and poorly protected. Hopefully you can survive on what you had when hired, because that’s about you’ll have now that you’re fired.: Are we tying this money to he pockets of the leadership? When gamblers go on a losing streak it’s said that they are throwing good money after bad. Is that essentially what our government is doing. It is tragic what may befall those that put all their eggs in the baskets that are now found to be filled with holes. But isn’t it a greater tragedy to use taxpayer dollars support this and basically ask those who, to this point, likely have had no dealings with these companies to help bail them out? This may prove an economic stabilizer for the nation, but does it guarantee me a home loan, will I have be given 100 shares of a stock that is on the rise free and clear? What will the benefit to the guy who works for $521 a week and brings home $387 after taxes; is paying $650 moly. to put a roof over the heads of a wife a 4mo old and a 4yr old, $180 a mo. for gas, $400 mo. for utilities, $200 mo. for food (not much left for incidents and accidents)? This started as a response to a blog and is starting to sound like something bitter, so let me just say this: If we bailout these companies that are in trouble then who’s watching to make sure they do what is best? Then who will be watching the watchers? What exactly is Mark’s stand on what should be done to right the wrong ships?

    Thank you,

    Comment by Enor23136 -

  26. Pingback: Will the Bailout save America or send us into the abyss | this point of view

  27. Pingback: Love him or hate him, he’s right « Anatomy of a Recovering Entrepreneur and Other Non-Associated Ramblings

  28. In a speculative market, we will lose.

    Comment by PSC -

  29. The Bankers have been sitting at the POKER table for the last
    several years.
    They played their hands with their available skill. [Or lack of skill]
    They LOST all their chips so like all losing Poker players they now have to leave the table.

    Comment by Roy -

  30. Salvation/bailout packages by governments often exceed the initialy stated amounts.

    Comment by bankelele -

  31. First, let me say that this type of forward thinking is a requirement of decisive action and I am concerned that the best thinkers have profited from avoiding public service. While I am a fan of your insight, I sometimes wish you, Mr. Cuban, were sitting on the Senate Banking Committee. Between you and Sen. Frank, it would be the most informative and entertaining set of hearings since HUAC. Ok, bad example.

    Second, and the main point here, is that a requisite for any bail out must be the development of rules, guidelines, or laws for how loans are given to individuals who lack significant savings and liquidity. Yet even these rules won’t protect a class of consumers we can safely categorize as “dumb”. They lack the knowledge and education to ask even the most basic questions. There needs to be, at some point during this national debate on how to best restructure our economy (a debate we haven’t had in 76 years), a discussion on instituting required courses for high school and college students on credit management, budgeting, taxes and public service. That last one was for me, but the rest remain a priority of this nation. Surely we can rely on parents to teach these lessons to their children, but even that is “dumb” considering they haven’t been taught themselves.

    Education and studious fiscal responsibility are the only ways we can protect this vicious circle from consuming us all.

    I’ll leave you with this thought – nothing happening today is dissimilar from our past market seizure except it is moving faster and leaving a broader wake.

    Comment by Lloyd -

  32. It is more vital now to have this done with all of these companies now being under investigation by the FBI for fraud and misuse of funds. As it stands right now, the current proposal is giving these CEO “Financial Engineers” a “Get-Out-of-Jail-Free” card along with $700 Billion to create more havoc. Your absolutely right, Mark, if we don’t set guidelines of how this money is to be used now; we will be here again before the year’s end. The more we allow this type of “creativity” to continue, this cycle won’t end, and it will only put us deeper in a recession hole that we may not recover from. I’m not for complete “Government Control” but there needs to be a balance of Government Intercession. Government Intercession sets guidelines for people to follow, without a ruling thumb. Isn’t that what our forefathers had in mind when they drew up the Constitution, or was that a dream I had while sleeping through US History?

    Comment by Nate -

  33. Mark, here are some videos of those bankers:

    Comment by wifiscott -

  34. This won’t get better until home prices start to rise again…so in about 20-40 years.

    If I handled my personal finances irresponsibly and got bailed out, where is my motivation to change? I think we are just delaying a crash and have been for a while iwt all the cheap money htat has been being pumped out over the last few years. Greenspan gave it away like candy and now we will all pay. When the dollar is worthless, maybe we will wake up as a country…just hope it doesn’t get to that point.

    Thanks for the discussion Mark.

    Comment by jsandifer -

  35. Yes there will be definitely reform without question. We are doing
    it backwards with our shoot, aim, but I think I this point we have
    no choice.

    As far as any criminal activity I am going to assume very few will be actually
    going to jail. After all how can you jail someone if a law hasn’t
    been broken or regulation doesn’t exist (ie Credit Default Swaps)
    Ethics, well that’s a whole other story and hope these guys burn in

    Are you saying that bankers should be giving loans like previous?
    Hell no! That what got us into this mess. I suspect that many
    Bankers will be initially gun shy with this crisis, but will become
    more open in the coming weeks, months.

    This crisis comes down to two issues:
    – confidence
    – cash flow

    One or the other can cause a recession, with both watch out!

    Comment by Larry Ludwig -

  36. This bail-out is a top-down solution to a bottom-up problem,
    mortgage defaults. I’m not making excuses for consumers who
    agreed to lending terms they can’t afford, but mortgage lenders
    had opportunity to renegotiate lending terms with customers.
    They could ask for government assistance in doing so. They
    aren’t. They simply want to get the assets off their books.

    How about a government program to keep people in their homes
    and paying their mortgages? The government’s cost of borrowing
    should be less than any bank. Uncle Sam can eat a few points
    on trillions of dollars worth of mortgages, reducing peoples’
    house payments, and propping up their ability to repay their
    loans. Why isn’t Washington creating a program to help people
    refinance their homes into affordable, government mortgages so
    the banks can get bad loans off their books that way? This
    would be a bigger economic incentive than sending checks for a
    few hundred dollars to millions of Americans, who immediately
    turn around and put that money into their gas tank or use it to
    service their revolving debt or catch up on utility bills.

    Fix the bottom-up problem with a bottom-up solution.

    Comment by Jeff -

  37. It scares me to think about because I know you are absolutely right. They are in such a rush that they aren’t looking at it from all sides. It’s the credit squeeze that will end up affecting us, the regular folk who aren’t well off, and the people who employ us. If small businesses cannot get loans they will have to cut costs somewhere (just like big companies) and the easiest was to cut costs is to lay off. It’s potentially going to ruin the country for a long time if the elected officials can’t see what a businessman can see so damn clearly. It will be hard for Main Street to survive in that climate, much less thrive. If 90% of America doesn’t have money to cover the basics, how are we going to spend “extra money” on stuff enough to stimulate the economy? We won’t and we’ll sink into a genuine Depression. Thank you Mark for your insight, and I pray that our leaders read your blog entry.

    Comment by Michael M. -

  38. Hi Mark,

    A few points to consider:

    First, remember it was the Congress who mandated to Fannie and Freddie that a) their loans be 50% to minorities and the poor, and 2) that food stamps, unemployment and other transfer payments must be considered as income on the applications (NO, I AM NOT KIDDING. LOOK IT UP). So what makes you think they are smart enough to know exactly what to do to fix this? Have you met your Congressman? Like most of them are, he’s probably a moron just trying to hang onto the best job he’s ever had or ever gonna have. Not much incentive to drive real change, even if he was smart enough to do so, which he likely isn’t.

    Second, while these clowns debate where and how to place the pump, the boat is taking on ever more water. Whatever they do, they better do it damn quick before the boat sinks and no amount of money will fix the problem.

    Remember: the heart of this wasn’t lack of intelligence, but lack of due diligence. When these guys saw the AAA rating on these securities, they bought and sold them all over the world (foolishly as it turns out) expecting that the paper was in fact AAA. The rating agencies failed at due diligence. The banks who sold these failed at due diligence. And the insurance companies who insured these (think: AIG) failed at due diligence.

    Final point: It is more than possible… dare I say likely… that if managed correctly, the Feds could make alot of money on this deal. The government’s power is the length of their time horizon, and it probably would not take more than 8 or 10 years to work this completely out.

    The problem the last time with the RTC? An S&L would fail and go into the Fed’s hands, and the same guys–literally– would form another corporation, and buy back from the Fed the identical assets at pennies on the dollar. Disgusting.

    Want to focus on something? Focus on who in the hell is going to manage these assets on behalf of the American people and do so in a way that gets us the maximum profit, even if it takes 10 years or more to work it all out.

    By the way… on my site, I posted an excellent explanation of the problem that I found. Best of all, it is less than 250 words. Have a look.

    H. J.

    Comment by HJ Mann -

  39. Pingback: Mark Cuban On The Bailout – Newscoma

  40. Right on Mark!

    The fact that congress is just now taking this seriously, and that they
    are rushing through a solution during a major election year is
    ludicrous. This morning comes news that China has suspended any loan
    activity with the U.S. – and apparently we were counting on that money.
    Much like mom and dad cutting you off financially while you’re at school.

    More people are scared of the theoretical ‘black hole’
    the CERN collider will cause than the financial one congress is
    currently creating. This will only continue to widen the gap of
    rich and poor and at some point – we’ll all fall victim to the
    financial event horizon.

    Comment by David Burrows -

  41. The whole scenario has banks gun shy from lending. They will continue to try and preserve equity by not making loans and selling their illiquid assets to the government.

    Judging by the questions the Politicians are asking Paulson and Bernanke, it does not appear the pliticians fully understand the ramifications of this credit crunch

    Comment by EG -

  42. The problem is that many people do not have 20% for a down payment.
    All roads lead back to the banks. As long as people are desperate
    to do business, they will tinker with the numbers to make it happen.

    What a mess. There is no concrete solution. You almost have to let
    it all play out and start over. People know what they can, and cannot
    afford. I have no sympathy for that game of “we didn’t know”.
    The mortgage brokers knew as well, so now they are paying the price too

    There is no free lunch. Very interesting ideas you have, however.

    I think you meant, You heard it HERE, first…not HEAR. 🙂

    Comment by Lori -

  43. just stepping back one second:

    why would the government buy rancid bank assets for $700 billion when they could buy the banks (and thus the assets too) for a similar price?

    Comment by jameskupka -

  44. BTW, by suspending his McCampaign, McCain has just thrown partisan
    Presidential politics into DC at a time when that is exactly what is
    not needed. And the dauphin Bush proved this by asking Obama to
    come to a meeting at the White House, thereby making it necessary for
    Obama to go, or look “unpresidential”.

    Mark, you really do not understand that suspending his campaign is just
    another political ploy?

    Comment by busdrivermike -

  45. Mark, I fear that with this post you have hit the nail on the head.

    Comment by sampablokuper -

  46. All great points, take care however not to try and hold one party responsible for the mess we’re in. No one group is any more or less to blame for the mess we are in. EVERYONE participated in this mess, buyers, sellers, bankers, agents, the gov, and anyone carrying a balance on their credit card or a HELOC.

    Comment by Shawn Shepherd -

  47. I agree with you about the current crop of bankers being a problem.

    I disagree with you though that banks will stop lending to middle class and low income people. If those people don’t have any money or credit, they won’t be able to buy the goods and services that the corporations and wealthy people, who you lampoon for being the beneficiaries of this plan, bring to market.

    The country has to come to grips with the fact that wealthy people are going to benefit from this situation. Why wasn’t Warren Buffet criticized when he made a $5 billion dollar investment in Goldman Sachs that he said was only possible because he thinks the bailoout is coming? Because he is a liberal Democrat resulting in the media staying silent because he is one of their boys.

    Comment by andwrig -

  48. I’m made speechless by the sheer weight of stupid people who think they have a clue.

    Comment by busdrivermike -

  49. so the bankers screw up and they want $700bn to solve the problem themselves???

    tbh i’m amazed no-one has drawn the link between paulson, goldman sachs and his money invested into a company who could soon be deep in trouble…

    Comment by rav -

  50. 1) To answer the question you pose in your title, YES.

    2) You’re last statement is wrong; bankers KNEW they were taking
    risks– even in the summer of 2006 (yes, OVER TWO YEARS AGO), there
    was a multi-page article about banks and PE firms taking huge risks…
    risks that they admitted were a little out there…in the hopes of
    winning big. (Think about the high roller who is doing well but bets
    a little too much out of nowhere and loses most his stack because
    of it.) It was either in THE ECONOMIST or BUSINESSWEEK. [By the
    way, if anyone can find that out, and even get then article itself,
    that would be awesome!] But this is important, for it proves that
    the bankers KNOW how to do things right; it’s simply that they didn’t.
    (Think about the smart guy who knows he should study but watches TV
    instead and fails the test. Same deal.)

    And trust me, for the next five or ten years, this is not
    going to happen again! In addition, corporations hire
    new bankers and brokers and analysts all the time; sure, the system
    is the same, but look, the people involved are different… BUT
    EITHER WAY, no matter who’s there, they’ll make sure they do things
    a lot better next time around.

    I mean, they won’t have a choice. The Feds are stepping in, so they
    better play right.

    Comment by the-cuban-responder -

  51. Mark,
    You might want to read the following article.
    What caused this mess is a lot more than what you

    This mess started with the CRA (Community Reinvestment Act)
    Read and learn.

    Comment by Milton -

  52. I’m still convinced that the best way out of this, if we want to use ludicrous amounts of money, is to pump the money into infrastructure for small business, and helping small businesses get going. (See: )

    Entrepreneurs are most likely to get the economy rolling again, as they spend money in places that need to be maintaining a cash flow, helping fellow Americans retain their jobs, so that they can continue to pay their bills to the banks that need people to pay their bills.

    Comment by Shawn K -

  53. None of this means anything unless the govt bails out those in
    massive credit card debt – hey, the govt. can forgive other
    countries’ debts, why not its own citizens?

    Mark my words – have a big financial institution clambake with this
    bailout, but even if the housing market rebounds, people won’t have
    ANY money because of credit card debt.

    Finger-waggers can do their thing all they want, and yep, of course
    some will take advantage and run their bills up again, but many
    would turn their lives around for the better.

    So, have fun with the whole Wall Street thing – credit card debt will
    keep Main Street from getting back in the game.

    Comment by Kevo -

  54. Thank God someone is saying what we all know is true!!!

    Comment by eddie -

  55. This quote in a WSJ article grabbed my attention:

    Yale’s Macey seemed to be a “no” (the votes were cast electronically) as he drew a distinction between successful bank bailouts, like that of Sweden in the 1990s, and unsuccessful ones, like Japan, also in the 1990s. A successful bailout clearly identifies who is getting bailed out and exactly how the bailout would save the system, he said. In Macey’s estimation, Paulson’s plan to buy up masses of mortgage securities is too vague to succeed. It isn’t clear who is benefiting, bank depositors, or bank management, or mortgage holders, he said, and the plan fails to directly ensure liquidity and solvency for financial institutions.

    Comment by FN -

  56. bankers … what about the politicians?

    Comment by Nation -

  57. Mark,

    I agree with what you state will happen…but:

    I think it’s fallacious to say the bankers caused the problem. I,
    quite honestly, don’t think there is a real “problem.”

    When everybody and their brother wanted money, wanted the new home,
    wanted the apple pie cooling in the window, congress and banks made
    it easy for anyone to get a loan. Yes, the banks made poor loan choices.
    Yes, Wall Street enabled the process by packaging and re-selling the
    mortgages. But the average American who thought their home’s value should
    go up every year 20% and their home was an ATM is now in for a rude awaking

    Wall Street isn’t a criminal anymore than the local liquor store is to
    blame for the town drunk. And as such, there isn’t a problem, rather an
    inevitable situation that has to happen. Were real estate prices in
    Manhattan going to go up forever at 20%+ per year?

    Comment by David -

  58. I agree 100%. We need thinkers like Mr. Cuban to get the word out. The politicians need to be honest and tell the American public the truth. They know that this will only help Wall Street.

    Comment by Brad Olsen -

Comments are closed.