Economics

Bailouts for the Little Guy

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Why can't the federal government take all of our bad assets off our hands, not just those of big banks and financial institutions? That's what "Buy My Shit Pile.com" is wondering. Go there to publicly post your own now dubious investments and call for your own personal bailout. As the site says:

remember, when estimating the value of your 1997 limited edition Hanson single CD "MMMbop", it's not what you can sell these items for that matters, it's what you think they are worth. The fact that you think they are worth more than anyone will buy them for is what makes them bad assets.

If I can't have my Dazzler #1 multiple copies propped up, the consequences for the economy will be…well, really, we can't even think about it. Just act! Now!!

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  1. Today’s outrage:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aEyg9syOgmjE&refer=home

    They are now saying they won’t pay a market price for these securities, but a “hold to maturity” price. Essentially that means they’re telegraphing that they intend to pay the face value for the securities.

    So A) everyone who was saying yesterday that maybe the Treasury could make a profit on these securities has had the rug pulled out from under them and B) the size of the giveaway just got a lot larger, because most of these securities have already been marked down on the balance sheets of the investment banks. So we’re going to pay these banks more than what their own balance sheets say the instruments are worth, handing them a huge windfall.

    This is insane.

  2. Maybe I can finally get some money for my Avant Garde albums.

  3. Haha, Dazzler? Did you think she was hot or something? Hell at least Dazzler is somewhat respectable, I had more than one copy of SuperPro #1, a comic that was more of a crossover marketing gimmick for the NFL. Not to mention my several copies of Superman’s death, rebirth, funeral for a friend, that wolverine with the claw marks on the cover, amazing spiderman #300 with a hologram on the cover, Punisher scratch and sniff cards (I kid you not they smelled like gunpowder, or were supposed to at least)…etc, etc…

  4. gimme some money. gimme some money.

  5. I have a big pile of dollar bills circa 1998, can I put these now distressed assets on buymyshitpile.com?

  6. It sounds like, among other things, that we can expect high inflation as a result of all of this. I guess that’ll be great when I can pay off my mortgage and student loans with a couple of paychecks, not so great when I can only afford to buy a loaf of bread a month.

  7. Matt Yglesias is reporting the following:

    I just heard Ben Bernanke saying that there should be no “punitive measures” for companies that participate in a bailout because that might discourage firms from participating.

    Interesting point Mr. Bernanke — but don’t we want to discourage banks from being bailed out and making it only an attractive option as a last resort.

    These guys aren’t even pretending that this is anything but welfare for Investment Bankers.

    Just so that I understand this right.

    A single mom on welfare deserves to have some type of punitive aspect as a condition of receiving government handouts.

    Investment Banks that are actually still solvent deserve no strings attached free government money.

    And here I thought it’s the left that’s socialist.

  8. Fluffy-

    I thought that was what that lying sack of shit Paulson said, but I was trying to pretend I heard incorrectly.

    As far as I can see, this whole thing is just a scheme to fix the banks’ balance sheets, by paying (as you rightly put it) face value for worthless assets.

  9. I don’t want to go out too far on a limb here and start making predictions that will fail and make me look stupid, but am I the only one who thinks that Paulson overplayed his hand on this one, and that the likelihood of this bailout actually taking place is receding by the hour?

    Everywhere I look – left, right and center – I see nothing but disdain for this plan and outrage. How does the Congress end up passing a plan everyone hates?

  10. ray,

    gimme some money.

    You the new drummer for Spinal Tap?

  11. How does the Congress end up passing a plan everyone hates?

    You mean like UIGEA? Or continued funding for the war? Or telecom immunity?

    There’s a reason they have approval rates so low they could walk under a rock with a ten-gallon hat on.

  12. How does the Congress end up passing a plan everyone hates?

    Because the know full well that the reality is:

    What are you gonna do? Vote 3rd party?!?!?!

  13. Fluffy, I wish you were right, but it’s gonna happen regardless of the yelling of the right and left at the moment. Of course, it’s NOT

    http://www.webofdebt.com/articles/its_the_derivatives.php

    gonna actually help any more than pissing on a forest fire would help put it out, because it’s “only” a Trillion of the taxpayers’ dollars, and these crooks are in the hole for FAR more than that if my guess is right…

  14. “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

    Am I the only one who thinks inserting this should be an impeachable offense? That whole “preserve, protect, and defend the Constitution” thing has gone by the wayside, I guess.

  15. What I’d like to know is how bad the consequences would be if the government simply did nothing. “How bad” also should include the duration of the pain. I’ve heard insane hyperbole from government officials touting the bailout, so I’m not talking about their assessment of the situation. If I went by Paulson et al., I’d be getting measured for a leather suit and wiring my gas tank to explode if tampered with.

  16. How does the Congress end up passing a plan everyone hates?

    Because the know full well that the reality is:

    What are you gonna do? Vote 3rd party?!?!?!

    Homer: America, take a good look at your beloved candidates. They’re nothing but hideous space reptiles. [unmasks them]

    [audience gasps in terror]

    Kodos: It’s true, we are aliens. But what are you going to do about it? It’s a two-party system; you have to vote for one of us.

    [murmurs]

    Man1: He’s right, this is a two-party system.

    Man2: Well, I believe I’ll vote for a third-party candidate.

    Kang: Go ahead, throw your vote away.

    [Kang and Kodos laugh out loud]
    [Ross Perot smashes his “Perot 96” hat]

  17. Somebody on CNBC this morning was claiming we were “fifty trades away” from a total meltdown of the financial system, Thursday.

    Whatever the fuck that means.

  18. So, are Paulson and Bush getting their economic advice from Robert Mugabe or something? This is getting ludicrous.

  19. Somebody on CNBC this morning was claiming we were “fifty trades away” from a total meltdown of the financial system, Thursday.

    Whatever the fuck that means.

    I think that means that some of those ‘toxic’ mortgages turned out to be mortages on Chernobyl.

  20. err, s/mortages/mortgages/

  21. If I went by Paulson et al., I’d be getting measured for a leather suit and wiring my gas tank to explode if tampered with

    “It’s my snake, I trained it, and I’m gonna eat it!”

  22. ProLib,

    What I’d like to know is how bad the consequences would be if the government simply did nothing. “How bad” also should include the duration of the pain.

    My completely pulled out of my ass opinion:

    Really, really bad.
    Not that long.

    Also, amazingly strong growth from 2010 to 2020.

  23. “They are now saying they won’t pay a market price for these securities, but a “hold to maturity” price. Essentially that means they’re telegraphing that they intend to pay the face value for the securities.”

    I think Bernacke & Paulson structured AIG right, but this certainly doesn’t sound good. Note though, that while mark to market seems to be out (for a number of reasons, not the least of which is that there is almost no market for this illiquid toxic waste), a “hold to maturity” valuation should not just be be the bare notational, but rather the notational discounted for past and likely future failures of the underlying securities. Somehow I just don’t see that sort of meaningful analysis happening under the Treasury’s watch when the private sector, with a huge profit incentive to get it right, completely missed it.

  24. . . .”fifty trades away” from a total meltdown of the financial system. . . .

    That’s exactly what I’m talking about. Nonsense. Even some of the disaster companies are sounder than they are being made out to be. For instance, Washington Mutual has something like a quarter trillion dollars in deposits. So long as there isn’t a run on those deposits–and there hasn’t been one yet–the bank can likely survive all of this.

    Another interesting development is the move of the remaining investment banks to bank holding companies. Back when I was in banking, I got into several discussions about why broker-dealers and the like should consider doing just that. Although the regulatory environment is stricter under the Fed and the FDIC, Gramm-Leach-Bliley liberalized things enough to make the move a tempting one. The major loss is that they won’t be able to leverage at 30:1 ratios anymore.

  25. I can’t resist saying it again. “But e-gold was the problem.”

  26. JMR

    e-gold was the problem

    Before e-gold existed, we never had problems like this.

  27. “It’s my snake, I trained it, and I’m gonna eat it!”

    “Pinchy would have wanted it this way.”

  28. TAGS! TAGS!

    I’m too upset from that Dazzler crack.

  29. gimme some money.

    You the new drummer for Spinal Tap?

    I was just thinking about how that song has become the new Wall Street anthem.

    “You know what I want…or maybe you don’t.”

  30. “What I’d like to know is how bad the consequences would be if the government simply did nothing. “How bad” also should include the duration of the pain.”

    Really. Freaking. Bad. 1-2 years in duration, possibly a lot longer and deeper if it scares off the foreign investment in Treasury securities which has been financing our fiscal stupidity for years.

    Start with hundreds, possibly thousands, of bank failures (BTW, the failure of IndyMac alone drained almost 15% of FDICs reserves). Add in thousands of closed business and deep double digit unemployment. Wipe out a couple hundred bilion in retirement funds and the welfare state road show will begin in earnest. The government will undoubtedly respond by cranking up the presses and printing more money to pay its debts, expanding the money supply and throwing napalm on the inflation fire.

  31. I was just thinking about how that song has become the new Wall Street anthem.

    And soon, “Hell Hole” will be the anthem for the rest of us. Where’s my last of the V8 Interceptors again?

  32. “Washington Mutual has something like a quarter trillion dollars in deposits. So long as there isn’t a run on those deposits–and there hasn’t been one yet–the bank can likely survive all of this.”

    Its not the individual depositors that can cause the big problems; its the ABS/MBS derivatives, ratings downgrades, collateral calls, settling losing default swaps.

    Look at AIG – it wasn’t a solvency issue, it was a liquidity issue.

  33. How does the Congress end up passing a plan everyone hates?

    They’ve got the public convinced that they’d hate the alternative worse. And no one wants to be accused of “doing nothing” when bad stuff is happening.

    And here I thought it’s the left that’s socialist.

    Valid as criticism against the Republicans, but it’s hardly like the Democrats are blocking this, only trying to put in more regulation.

    BTW, I saw a prominent British Labour politician on the BBC last night say, “If the banks, why not the utilities?” So yes, the left is more socialist, even if our current crop of Republicans have hardly forsaken socialism themselves.

  34. Check out Paulson’s performance before the Senate Banking committee.

    Regarding a lack of oversight in his proposed plan he says:

    We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.

    And then think about the fact that his plan included the following language:

    Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency

  35. “Hell Hole” will be the anthem for the rest of us.

    Unless McCain wins, and Palin gets fat, and THEN it could be “Big Bottom”! (Grasping at straws? Perhaps. But it’s better than the alternative.)

  36. BTW, I saw a prominent British Labour politician on the BBC last night say, “If the banks, why not the utilities?” So yes, the left is more socialist, even if our current crop of Republicans have hardly forsaken socialism themselves.

    I don’t think it’s at all valid to say that the left is “more” socialist. They just have different recipients of their wealth redistribution plans. (And that is exactly what the Paulson plan is.)

    My point isn’t that Dems are necessarily better (although if I have to choose between welfare for the poor vs welfare for Investment Banks I would most definitely choose the former) it’s that the argument put forth by MANY libertarians that only “THE LEFT” is THE SOCIALISTS should be put to rest once and for all.

  37. Stop wasting my time
    You know what I want
    You know what I need
    Or maybe you don’t

    Do I have to come right flat out and tell you everything?
    Gimme some money, gimme some money

    I’m nobody’s fool
    I’m nobody’s clown
    I’m treating you cool
    I’m putting you down

    But baby I don’t intend to leave empty handed
    Gimme some money, gimme some money
    Oh yeah! Go Nigel, Go!

    Gimme some money, gimme some money
    Gimme some money, gimme some money

    Don’t get me wrong (Gimme some money, gimme some money)
    Try getting me right (Gimme some money, gimme some money)
    Your face is OK
    But your purse is too tight (Gimme some money, gimme some money)
    I’m looking for pound notes, loose change, bad checks, anything
    Gimme some money, gimme some money

    Gimme some money, gimme some money
    Gimme some money, gimme some money
    Gimme some money, gimme some money
    Gimme some money, gimme some money
    Gimme some money, gimme some money

  38. Unless McCain wins, and Palin gets fat, and THEN it could be “Big Bottom”! (Grasping at straws? Perhaps. But it’s better than the alternative.)

    Well, you at least plausibly got to “Big Bottom”. I was trying to somehow get to “Sex Farm”, but couldn’t do it.

  39. I just turned my PC speakers up to 11.

    Episiarch,

    The song you’re looking for is “Lick My Love Pump.”

  40. Everywhere I look – left, right and center – I see nothing but disdain for this plan and outrage. How does the Congress end up passing a plan everyone hates?

    Because everyone will just blame the other party.

  41. The thing that still irks me is, at this point nobody even knows how “toxic” these mortgages are. Or to put it another way, nobody knows the real value of these supposedly terrible mortgages.

    And most importantly, there is now ZERO incentive to determine their real value since the Feds are willing to pony up “$700 Billion” (or $1 trillion or whatever number some spokesman pulled out of his ass this morning) to bail them out. This is just the most enormous cash giveaway in history–what if the “toxic” mortgages are really worth $100 billion more than whatever the bailout turns out to be?

    Does that mean $100 billion goes into someones pocket? Seriously, I don’t exclaim a “WTF?!” lightly, but WHAT THE FUCK?!

  42. I can’t help wondering where we’d be right now if the energy devoted to seeking government “relief” had been directed toward analyzing and cleaning up those toxic loan portfolios.

  43. I bought a house I could afford and took out a mortgage that was perfectly within my ability to pay.

    I get something good out of all this, right? Right?

    Oh.

  44. No SugarFree, you are a sucker. Just like me, I did the same stupid thing.

  45. We missed the obvious contribution to buymyshitpile.com: Shark Sandwich.

  46. Matthew,

    When I get that time machine perfected, you want to go back to 2003 and buy a mansion with no-money-down, and a balloon payment? We could cry about how there was no way we could have managed to read all the fine print and wait for Paulson to swoop down to save us.

  47. SugarFree,

    Awesome. We’ll be rich, RICH!

  48. What a dumb P.O.S. policy the federal government was promoting.
    “Oh, I see. So people are moving more frequently than they used to and our economy is more dynamic. Let’s promote a massive increase in ownership of non-liquid, geographically set assets, driving up home values and simultaneously making home value something that “matters” because we’re turning the typical know-nothing about economic matters and in thousands of dollars of credit card debt American into a quarter to half-million dollar investor. What could possibly go wrong?

  49. Matthew,

    Then we can fulfill the real reason I built a time machine: Punching the greatest douches of history in the junksack.

    Starting with Paulson.

  50. SugarFree,

    I like the way you think. Some people would use a time machine to kill Hitler or Stalin or whoever but that would alter history. Instead just punch them in the junk. Probably no affect on history and you would still have the pleasure of doing it.

  51. We missed the obvious contribution to buymyshitpile.com: Shark Sandwich.

    If you actually had a copy I it would be worth real money, no need to have the government buy it.

  52. Punching the greatest douches of history in the junksack

    Wasn’t there a Twilight Zone episode about this?

  53. Somebody on CNBC this morning was claiming we were “fifty trades away” from a total meltdown of the financial system, Thursday.

    Whatever the fuck that means.

    Probably refering to this ‘500 trade from armageddon’ story from the NY Post.

  54. Sugarfree,

    I’ll bring my best steel toed boots.

  55. Folks

    I need some advice on pricing some shit for Buymyshitpile.com

    535 congress critters – barely used $19.95 for the entire lot. (full disclosure – not much use for them)

    You think this shit will sell or is that price too high?

  56. My cousin still has a lot of beanie babies left over from the beanie baby bubble back in the 90s.

  57. Wasn’t there a Twilight Zone episode about this?

    Submitted for your approval: Several of this country’s most powerful douchebags, all with unbruised, unswollen genitalia. As they go about their business, they believe their junk to be safe- as it would be, but for the Twilight Zone

  58. Fred | September 23, 2008, 6:12pm | #

    Folks

    I need some advice on pricing some shit for Buymyshitpile.com

    535 congress critters – barely used $19.95 for the entire lot. (full disclosure – not much use for them)

    You think this shit will sell or is that price too high?

    Fred, if you’re asking me to buy, that’s about three orders of magnitude too high.

    But it’s the Government that’s buying, so you should add five or six zeros between $19 and the decimal point.

  59. Start with hundreds, possibly thousands, of bank failures (BTW, the failure of IndyMac alone drained almost 15% of FDICs reserves). Add in thousands of closed business and deep double digit unemployment.

    If this crisis really runs that deep, Paulson’s bailout ain’t going to prevent it from happening.

  60. If I can’t have my Dazzler #1 multiple copies propped up, the consequences for the economy will be…well, really, we can’t even think about it. Just act! Now!!

    As a wee lad, I one day road my bike to the town pharmacy and purchased the first issue of a comic book about a guy with a flaming skull who road a motorcycle. If I had a time machine, I would show up there, and say, ‘hey, kid, buy four copies of that, and don’t unseal the wrapper!’

  61. Scratch that, it couldn’t be correct. I
    would have had to been around eight before riding around the town and collecting comic books. First issue of Ghost Rider was in 1973 and I’m a little younger than that! Probably a reissue.

  62. So the poor kid with 80,000 dollars in student loan debt, and no job prospects due to the corruption on Wall Street, can’t get bailed out because of bankruptcy laws that protect Sallie Mae, but the guys who caused the corruption on Wall Street are getting handed the keys to the U.S. treasury? If we’re gonna start repudiating debt, it seems only fair that the poorest should move to the front of the line. Kill Sallie!

    (tongue in cheek, but only halfway)

  63. Why can’t us little guys get in on the public aide checks? All I’d need is $335K. Deduct my $320K mortgage, give that to my mortgage company and send my creditors $15K to knock out those credit cards. I’d be able to do my part to stimulate the hell outta the economy with my $50K gig at the post office, that’s for damn sure. Multiply that by 100 million homeowners and that’s what the government would need to spend on fixing this mess they got us into.

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