A reminder, the bailout is not about the economy, its about the finance system

[ThomWV]

The economy is in just about the same shape today as it was last week or last month or last summer for that matter. Our finance system, however, is stone cold broken. Now in time its true that the finance system can wreck the economy, but they are not the same thing and taking a little time to examine what actions are required to keep the finance system going will be time well spent.

[lib2DaBone]

1. I agree. I can't understand the big rush to pass this by Friday?

Tony Fratto, Mr. Bush’s deputy secretary, told reporters there was a “great sense of urgency” to get the legislation passed this week.


I know CONgress is going on vacation this Friday.. but there must be something else? Maybe they know what the October Surprise is?

[On the Road]

2. No, the Bailout is About the Economy

An economy can withstand a single bank failure. You could argue on that basis that Bear Stearns was about a single company or a single industry.

Financial failues are occasionally confined to the financial industry (eg, 1901 and 1987), but more commonly spread to the entire economy. In addition to the Great Depression, The US went through serious recessions associated with bank failures 1819, 1837, 1857, 1873, 1893, and 1907. When banks fail en masse, credit dries up, trade and industry stops, unemployment skyrockets, property loses its value, and the rich buy up cheap assets. It is not something to be toyed with.

It's been known for awhile that a string of financial failures was possible, but Sep 14 was a wake-up call. Lehman's failure or the liquidity squeeze of a few days later could both have had a domino effect on the whole economy. It is still a real possibility, and the bailout will dramatically reduce that possibility.

What was scary about the recent crises was that they came to a head so quickly -- in a matter of hours. McCain's approach, which seems to resemble yours, is to get angry about individual failures and appoint a commission to study the problem. It is not a serious approach.

[avaistheone1]

3. I don't agree with the bailout at all. Instead why not create a government run bank with sound

regulations with the 700 billion dollars? It would keep credit moving for credit worthy individuals that troubled financial institutions will not lend to for homes, autos, school loans and businesses?

The big threat Paulsen says is that credit is not moving. It would solve that problem without rewarding financial institutions who have playing the financial system like a casino.

[1]

4. the problem is that pesky x factor of "confidence"...

its not logical. its not scientific. its emotion. the "achilles heel" of economics that can never be predicted, only manipulated.

a city might have enough gasoline to run just fine. but if a rumor gets started of a shortage and confidence gets shaken, then people that would normally just buy what they need all of a sudden are buying in excess. filling their tanks and red containers in their trunks. ensuring that they "get theirs."

the result is a city out of gas. as has been shown several times post hurricane ike.


what you say in you post is correct for logically thinking human beings.


take you time, think it through, do the right thing.


as if human beings ever thought logically.


if a financial/economic rumor gets started (and "economic players" are far more alarmist than the gas buying public) all of a sudden people are selling in excess to ensure that they "get (or at least protect) theirs."

the result is an economy out of gas. gone. done. in the shitter with our jobs and lives gone too. then you and i don't need the internet. we can talk in person in a bread line.


what it takes is the logic to be one step ahead of the emotion. knowing when the rumor will overcome the confidence.

something that cannot not be known...