[4Tran]

Originally Posted by TinyRedLeaf

I highlighted the third point because I see it as an essentially pointless suggestion. How much leverage is safe leverage? That's virtually impossible to say in advance. It all depends on an organisation's risk appetite. It doesn't change the simple fact that if you owe more than you can pay, you'd still be bankrupt, no matter how little you owe.

To be honest, after watching that video, I'm not convinced that it's necessarily going to solve this particular issue. Nouriel Roubini's plan seems to be quite a bit better. That said, all the video is saying is that the maximum leverage should be set to the original limit. I can definitely see a little leverage being a useful tool, but it needs to be used in an environment that's much more transparent than it currently is. Whether a 12:1 ratio is a good idea is completely beyond my ability to determine.

Originally Posted by TinyRedLeaf

Most of all, people ought simply to learn how to save. Consumers have been suckered by commercials about easy money for so long that they've forgotten that cash in hand is worth a lot more than all the "future money" you haven't actually earned.

Part of the problem is that there are a lot of people who don't want to learn. What's really scary is that these people are allowed to vote.

Originally Posted by TinyRedLeaf

I don't fully agree. If anything, I believe the Fed and the US Treasury should have acted a lot sooner rather than sitting on the problem, hoping that the market would eventually sort itself out. As long as the bad debt continued to sit on every financial institution's books, the problem will never be completely solved.

I think that you're misinterpreting my point. What I'm saying is that a $700B solution that grants unprecedented powers should be studied extremely carefully, and that those making the decision shouldn't be rushed into doing so.

As to your tangent about how the government should have addressed the problem months ago, apparently they have. It appears that the Paulson plan has been in the works for eight months, and that they were just waiting for an opportune crisis to unleash it on the rest of the country. I really hate conspiracy theories, but the people in charge seemed to be aware of an imminent disaster, and instead of doing anything about it, they seem to have been trying to figure out how best to gain from it. Even worse, they did so while constantly bleating out the "fundamentals are strong" mantra.

Originally Posted by TinyRedLeaf

Meanwhile, regarding Green²'s assertion that the bailout would weaken the US dollar, he is right. In the long term, the US Treasury will have to print more money to pay for all the debt it is proposing to buy.

They'll probably end up just borrowing the money instead. That's how the Iraq war and the Bush tax cuts were paid for. Doing this too much would probably blow up the bond market, but I don't think the Treasury will resort to devaluing currency. That's going to be especially true in the likely even that the U.S. enters into a recession.

Originally Posted by TinyRedLeaf

That would eventually lead to the devaluation of the US dollar, which would make imports more expensive. That would curb consumption, and if this happens severely enough, it could trigger a US recession. On a wider scale, the world might be tempted to abandon the greenback on global forex markets, which would further destablise the US economy. A weaker dollar also makes US dollar-denominated financial instruments less attractive to foreign investors, making it harder for the US government to raise cash to pay for the bad debts.

One of the big unstated goals of the bailout is to reassure foreign investors and central banks that their investments are safe, and that the U.S. remains a good place to do business. Any action that threatens that may well do more damage than if the government did nothing. That's one of the big reasons why foreign corporations are potentially allowed to receive bailout money.

Originally Posted by TinyRedLeaf

On the other hand, a weaker dollar could help boost US exports, and in a best-case scenario, that could help the US close its trade deficit. It would also make US assets more attractive to foreign buyers. Of course, Americans would be leery about letting foreigners buy various national institutions, but then again, beggars can't be choosers.

I doubt that American exports are going to go up by much on the basis of a weaker dollar. In fact, it's probably a really bad idea right now because it will drive commodity prices sky-high. And (even more) sky-high commodity prices, oil prices in particular, will cripple the American economy.

http://www.forbes.com/home/2008/09/2...23bailout.html

Lawmakers on Capitol Hill seem determined to work together to pass a bill that will get the credit markets churning again. But will they do it this week, as some had hoped just a few days ago? Don't count on it.

"Do I expect to pass something this week?" Senate Majority Leader Harry Reid, D-Nev., mused to reporters Tuesday. "I expect to pass something as soon as we can. I think it's important that we get it done right, not get it done fast."

Sen. Sherrod Brown, D-Ohio, says his office has gotten "close to zero" calls in support of the $700 billion plan proposed by the administration. He doubts it'll happen immediately either. "I don't think it has to be a week" he says. "If we do it right, then we need to take as long as it needs."

The more Congress examines the Bush administration's bailout plan, the hazier its outcome gets. At a Senate Banking Committee hearing Tuesday, lawmakers on both sides of the aisle complained of being rushed to pass legislation or else risk financial meltdown.

"The secretary and the administration need to know that what they have sent to us is not acceptable," says Committee Chairman Chris Dodd, D-Conn. The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Wow. If it wants to see a bailout bill passed soon, the administration's going to have to come up with some hard answers to hard questions. Public support for it already seems to be waning. According to a Rasmussen Reports poll released Tuesday, 44% of those surveyed oppose the administration's plan, up from 37% Monday.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who testified before the Senate committee Tuesday, will get a chance to fine tune their answers Wednesday afternoon, when they appear before the House Financial Services Committee.

A spokesman for House Speaker Nancy Pelosi, D-Calif., says she is optimistic that the House will pass a bill this week. But that doesn't mean the Senate, which is by nature more sluggish than its larger counterpart on the other side of Capitol Hill, will be so quick to act.

"They will act first," says Sen. Minority Leader, Mitch McConnell, R-Ky. "Many of our members today were just beginning to have interaction with Secretary Paulson."

Dodd proposed his own counter-proposal to Paulson's plan earlier this week. Among other things, it calls for limits on executive compensation at troubled firms and for the Treasury to take a contingent equity stake in those firms. On Tuesday, Paulson rebuffed both ideas, as it might discourage firms from participating in the bailout program.

Those things aside, lawmakers have plenty of other concerns with Treasury's proposal. Sen. Charles Schumer, D-N.Y., suggested the bailout be doled out perhaps $150 billion at a time, instead of $700 billion all at once. Sen. Mike Enzi, R-Wyo., says it has an initial cost of $2,300 for every man, woman and child in the country. Sen. Jim Bunning, R-Ky., calls it a "financial socialism and it's un-American."

Dodd says that in speaking with his Senate colleagues, all are agreed on three issues: that a bailout bill include some oversight accountability for the Treasury, protection for taxpayers and that it address the continuing foreclosure problem.

He also points to one other concern: Paulson, the bill's chief architect, is scheduled to leave office in just four months.

"I'm not about to give a $700 billion appropriation to a secretary I don't know yet," says Dodd.

Ha! It looks like the $700,000,000,000 was completely made up! The sheer gall of the bailout plan's writers is astounding.