Breaking: State of Massachusetts denied credit! The other shoe is dropping, guys.

[beachmom]

http://www.boston.com/business/articles/2008/09/30/unknown_terrain_for_economy/

Unknown terrain for economy

In an example of how fragile credit markets have become, the state of Massachusetts yesterday tried to borrow $400 million to make its routine quarterly local aid payments to cities and towns. State treasury officials said the credit markets abruptly froze midday, leaving them $170 million short. The state will have to use its own funds to complete the local aid payments, draining the state's balance to extremely low levels.

"I don't think any treasurer alive could say they've ever seen anything like this," said Timothy P. Cahill, the state's treasurer. "There have always been cash shortages, but you could always go to the market and get more. This is the first time we haven't been able to do that."

Cahill said he believes the credit market will in effect remain shuttered today as the nation's largest lenders hold on to their cash amid uncertainty over plans for a federal bailout. In short, the House's rejection of a $700 billion Wall Street bailout plan takes Massachusetts and the rest of the US economy into territory that few policy makers and analysts wanted to explore.

...

The federal bailout proposal called for the government to spend up to $700 billion to buy mortgage-based securities and other holdings from financial firms. The idea is to boost confidence in those companies by taking the troubled investments, whose values have been sapped by the subprime mortgage market meltdown, off their books. Banks and other financial firms have stopped lending money to one another, afraid that their counterparts may have large holdings of such mortgage-backed assets, and could be in the same danger that caused firms such as Lehman Brothers to file for bankruptcy.

"These markets have to be stabilized somehow, " said Eugene White, economics professor at Rutgers University. "If we get into a downward spiral of credit tightening, more people will lose jobs, they'll stop buying goods and services, and we're in a recession that will be hard to get out of."

White said the collapse of the financial system and the subsequent drying up of credit created such a spiral in the early 1930s, turning the economic downturn into the Great Depression. He said the House's failure to act could be compared to the Fed of that period, which largely stood on the sidelines during a wave of bank failures. "We need government to come in and take decisive action," White said.

This is the "hidden" story which is not as easy to gauge as the stock market. I think the House Republicans made an unbelievable strategic blunder tomorrow, which they will pay for in the election. But honestly, I would have rather done not as well in the election, and had them do the right thing and voted for the bailout in the numbers they had promised.

[tandot]

1. Thanks for posting. K & R.

[MindMatter]

70. It is the bankers fighting back.

They have just upped the ante. Don't give in to those bastards.

Let's talk about getting some serious oversight where it REALLY belongs. Over the Fed. If they want to mess with us, then it's on.

[girl gone mad]

116. Does the bailout require the banks to loan money to Mass.?

No.

Is there any reason to believe that the money we hand over to the banks will trickle down to MA?

No.

If MA's inability to get credit is solely related to the credit crunch, then the US Gov should step in with a direct loan.

[defendandprotect]

2. See Kucinich on this "manufactured crisis"/video at DU ---

Would a red state have a problem ...?

[grantcart]

5. lol you have to be kidding lol

[msallied]

8. Kucinich has me on some issues and loses me on far more.

I think this is why he will never really go anywhere beyond where he is now.

[defendandprotect]

50. Yeah, it's the common sense that's hard to deal with --!!

[anigbrowl]

128. For every tricky problem there is an answer that's simple, convincing - and wrong.

[dkf]

141. Yes. He says some things that scare me.

I think he is wildly unrealistic.

[defendandprotect]

49. Try reading something about Nixon and his game-playing...

[grantcart]

69. lol this doesn't even reach the adolescent level. Even if you buy all of the conspiratorial bull

you have to have serious brain damage if you think that a conspiracy would reach down so low that it would involve hundreds of thousands of employees in hundreds of firms so that they would actually be denying loans to specific customers.

Even Dennis 'I saw the UFO' Kucinich didn't actually say it was from another planet or that they were trying to talk to him.

You had a plausible point of view going when you suggest that a few manipulators at top are drying the system intentionally.

Now that falls apart when you realize that they can actually make more money riding up and down a fluid market than blowing up one that gets frozen.


Its kind of like number 2's argument in Austin Power instead of having all of these shenanigans why not use the time machine go back and buy microsoft at $ 1.00?

The conspiracy you suggest gets people billions while riding up and down a fluid market would get them hundreds of billions.

Your homework assignment is to find one single reasonable source that thinks denying the State of MA credit was part of a political squeeze play. Just one.

[defendandprotect]

82. We're talking about STATE of MASS ---

Are we having the same conversation...???

You had a plausible point of view going when you suggest that a few manipulators at top are drying the system intentionally.

Now that falls apart when you realize that they can actually make more money riding up and down a fluid market than blowing up one that gets frozen.

THIS would be playing politics for greater control/power ..

also see right wing nedia cancelling prifitable programming to lose FINANCIALLY --
for a period of time -- to deliver r-w propaganda ...

Again -- see Nixon --

As for other ridiculous dunce cap thinking ...

Even Dennis 'I saw the UFO' Kucinich didn't actually say it was from another planet or that they were trying to talk to him.

To suggest that presidents, Truman military advisors, every kind of citizen -

commercial & military pilots, astronauts, doctors, lawyers, those who have

studied this for government ... large groups of citizens in every nation --

don't understand what they are seeing -- but YOU do -- is pitiful.

[grantcart]

92. you still failed your homework of finding one rational person to back your crackpot theories

back to the sandbox until you do.

Remember you just have to find one source that says that your wild ass theories are resonable.

Just one.

[defendandprotect]

98. Good debating skills ...

you're on ignore ---

[cui bono]

145. Rep. DeFazio was saying the same thing, not about this particular case though.

He said that the banks are denying credit to "Main St." so that Main St. would feel the pain and then the people would then be for the bailout.

It may be a conspiracy, but that doesn't make it untrue.

I was listening to Dean Baker today and yesterday, I can't remember if he mentioned this also, but he definitely thinks this is mostly scare tactics so that the fat cats don't lose their money. He doesn't believe the bailout will make any difference and isn't sure that it would help at all.

[druidity33]

155. Would a Red state have this problem?

That's the question no one here has answered.

:shrug:

[1corona4u]

7. Is kooch still relevant?

I don't think so....

[Nicholas D Wolfwood]

14. Has he ever been relevant? (nt)

[1corona4u]

19. LOL, not by my estimation...

;-)

[moodforaday]

95. Right, he only told the truth.

And we all know that's not relevant. "We're making our own reality now".

[Moochy]

161. Kucinich is hated more by blue dogs than anyone else

[moodforaday]

173. I know. And the people who claim

he is irrelevant are the people to thank for the two-party system looking more and more like a one-party system.

[blondeatlast]

48. Flies are a nuisance but they serve a purpose even if I have no idea what it is.

Kind of like Kucinich.

[slipslidingaway]

Too many of the relevant people helped pass horrible bills n/t

[Odin2005]

90. The Kooch is relavent?

since when? :rofl:

[Moochy]

160. Was 1corona4u ever relevant?

Tecate 4 life! :P

[beachmom]

9. I would recommend reading Krugman over Kuccinich. It is

not a manufactured crisis.

http://krugman.blogs.nytimes.com/

In his latest post, there is a story about McDonalds:

And now, early warnings that credit card rates and limits are being hit. Plus anecdotal evidence that business loans are waning — e.g., McDonald’s telling franchisees that it won’t lend them money for store improvements.

This could be the beginning of another big downward leg for the economy.

[msallied]

16. And the dominoes begin to fall...

[blondeatlast]

45. I was relaxing a bit yesterday after the bill failed; then I saw Krugman on "Countdown."

It's here and if cities can't get shared funds (as seen in the OP), the hurt will hit home a lot sooner than I expected it to.

[defendandprotect]

51. Bush has stopped some banks from lending... See Kucinich video --

[anigbrowl]

129. .

[ProSense]

20. Then why does he call it a "financial disaster" and why is he offering a bailout plan?

EQUITY, NOT "CASH FOR TRASH" IN BAILOUT

Kucinich Announces Plan for Ownership Society

Washington, Sep 22 -

Congressman Dennis Kucinich (D-OH) today made the following statement announcing a plan for a new Ownership Society:

“The Wall Street financial disaster is an opportunity to create a genuine ownership society. If Congress invests $700 billion in the market, then the American people must get something of real value for their investment.

“Simply purchasing bad debt, "cash for trash" and not receiving anything of value or giving $700 billion and not having a commensurate equity interest in Wall Street firms is unacceptable. No "cash for trash".

“Since the bailout will cost each and every American about $2,300, tomorrow I will offer legislation to create a United States Mutual Trust Fund, which will take control of $700 billion in stock assets, at market value and not higher, convert those assets to shares, and distribute $2,300 worth of shares to new individual savings accounts in the name of each and every American.”

Kucinich arrived at the $2,300 figure by dividing the cost of the bailout ($700 billion) by the US population (over 300 million).

[slipslidingaway]

32. Read what he said...

maybe the crisis was given a little push, possibly to push through this bill.

"...AMY GOODMAN: Congressman Kucinich, what happens if this doesn’t pass?


REP. DENNIS KUCINICH: Well, that’s exactly right. I mean, we need to be ready with plan B, which helps Wall Street restrain some of this bad conduct, which immediately, you know, puts—looks at some of the issues of liquidity that have to do with the policies of the Fed. We had a former head of the FDIC tell a group of congressmen yesterday that the Bush administration has been going around the last few weeks, actually, so tightening up on the practices of banks that they’re forcing them to have bigger reserves, which in a way would, you know, kind of create—help to create the kind of tight money policies that we’re saying we’re trying to alleviate with this bill. So, you know, there needs to be a deeper look at this.


It seems to me there’s a possibility that this crisis has a little bit of manufacture to it. And that really concerns me..."

[slipslidingaway]

Kucinich text from Amy Goodman interview...

sounds to me as if Kucinich is not saying that the whole crisis is manufactured, just that it may have been given a little push in order to pass this wealth transfer bill.

And that concerns him...me too.


http://www.democracynow.org/2008/9/29/is_this_the_united_states_congress

"AMY GOODMAN: Congressman Kucinich, what happens if this doesn’t pass?


REP. DENNIS KUCINICH: Well, that’s exactly right. I mean, we need to be ready with plan B, which helps Wall Street restrain some of this bad conduct, which immediately, you know, puts—looks at some of the issues of liquidity that have to do with the policies of the Fed. We had a former head of the FDIC tell a group of congressmen yesterday that the Bush administration has been going around the last few weeks, actually, so tightening up on the practices of banks that they’re forcing them to have bigger reserves, which in a way would, you know, kind of create—help to create the kind of tight money policies that we’re saying we’re trying to alleviate with this bill. So, you know, there needs to be a deeper look at this.


It seems to me there’s a possibility that this crisis has a little bit of manufacture to it. And that really concerns me, because we haven’t had enough time to look at this in an in-depth way, to analyze the impact of it on the economy, to see if it’s going to do anything about a recession that we’re obviously headed into, to see if it’s going to handle the underlying concerns on Wall Street about the speculation and a lack of regulation. The bill doesn’t, by the way, address anything about the speculation, anything about the lack of regulation. The SEC has failed. The Fed has failed. And we’re essentially telling all the same actors, “Go for it. You know, here’s another opportunity,” except this time it’s with taxpayers’ money.

[BrainStorm]

115. A manufactured crisis...

Hmm

[screembloodymurder]

35. Link please.

Searched and found nothing.

[defendandprotect]

52. You can't find the Kucinich video posted here at DU --- ????

[RollWithIt]

65. With all due respect to Congressman Kucinich, he doesn't know what he's talking about...

When Tim Ryan, the Democratic Congressman also from NE Ohio votes for it, I trust his opinion a LOT more.

[eridani]

142. He knows what it is like for a municipality to be denied credit for purely POLITICAL reasons

There was no "credit crunch" when all of the banks in Cleveland refused to roll over the city's loans unless Kucinich agreed to privatize Muni Light. It was a striclty political move to fuck over a politician who wanted to preserve a good deal for the general population.

The city then went into default. Although he became very unpopular, he nonetheless managed to run the city on a cash only basis. (There was never a bankruptcy, despite the constant spreading of this meme by the MSM.)

Fifteen years later Muni Light underwent a major expansion, and Kucinich won his first congressional race on the slogan "Because he was right."

[mzmolly]

78. How many people does Dennis think are in on such a conspiracy?

:shrug:

[karynnj]

79. In all due respect, what are Kuchinich's economic credentials?

You can argue about the errors that got us here, but the crisis is real. Businesses are having a harder time getting credit. That the state of MA was denied credit shows the depth of the problem - MA is one of the wealthier states.

How did Kuchinich do as the mayor of Cleveland again?

It is fair to argue about the best package, but when you deny there's a problem, it shows you are not facing reality.

[Odin2005]

89. You and Denis need to take off the tin-foil hats. n/t.

[burythehatchet]

120. I'm almost there

[Virginia Dare]

162. No matter what you think about bailouts or other "solutions"

this is not a manufactured crisis. It's been building for a long time. Too much debt and not enough cash to pay for it. It's real, don't stick your head in the sand about this.

The so-called "bailout" is actually a rescue operation for the credit markets. It's a temporary fix, but if we don't fix it, there will be strong repercussions. Maybe you're of the mind that we should buck up and accept those repercussions, and that's valid, but don't deny that there will be any.

[romulusnr]

3. changing the oil on a car with a cracked block

There is not really much the government can do to fix what is fundamentally broken.

The bailout is throwing good money after bad.
That never works.

I'm with HousingPanic. Take the executives (and government officials) who practiced and encouraged fraudulent lending practices and throw them in jail. Show that the government won't tolerate capital theft. Restore confidence in the market. It worked with Ebbers.

[msallied]

6. I think in theory you are correct. However...

I really really REALLY doubt any of these crooks will be doing the perp walk, much as I'd love to see it happen.

[girl gone mad]

107. They are already under investigation. n/t

[beachmom]

10. How do you "restore confidence in the market"? That is what

the bailout is about. The point is banks are not loaning to one another. Throwing a few people in jail, although satisfying, will do nothing to fix that problem.

[soothsayer]

63. Sure it will. It'll show the full faith and credit of the US gov't. And it will show them

that the orgy of risky investment of other people's (our) money is OVER.

[Nicholas D Wolfwood]

15. On what charge? "Horrible mismanagement" is not a felony, last I checked. (nt)

[defendandprotect]

110. First, bankrupting Treasury should be TREASON ....

But certainly, Ameriquest and its criminal thuggery qualify, as Enron did ...

How are all those who take $ from capitalists and serve them rather

than public any different from Sen George Stevens/AK-?????

[anigbrowl]

136. Never ascribe to malice what can be adequately explained by stupidity.

This is also the reason I don't alert your posts.

[PVnRT]

39. Unless you have no other option

Say you have a low-paying job in the wealthier community ten miles away with no bus service. You either keep the car running for as long as you can until you can get something new, or you stop showing up to work.

[romulusnr]

86. analogy

the point is you need to fix the engine not just put more oil and gas in it.

[defendandprotect]

53. right --

[msallied]

4. I think my ulcer just got worse... :(

I keep trying to argue to people that this crisis is going to hit people in a NUMBER of ways. It's not just WAll Street. In fact, it's not really Wall Street at all. Sigh...

Fuck Bush. I blame him most of all for this. I blame him because his eight years of wrecking this country made it impossible for people to actually understand this crisis for what it was.

[scheming daemons]

11. That is why EVERY day that this isn't solved is its own mini economic disaster

The patient is dying, and needs a blood transfusion.


And the doctors are standing around arguing about whether it's the patient's own fault and why should they help.

[beachmom]

13. Yep. That's how I see it, too. nt

[soothsayer]

64. That's a $700b bandaid, not a blood transfusion. Your patient is hungover, not dying.

[girl gone mad]

106. Things are very bad.

It's not the end of the world.

TARP was a terrible bill.

700 Billion will not stop the train wreck.

We need to use the 700 Billion wisely, not blow it on worthless derivatives and hope the money trickles back down.

This is what most people understand, that the regs in this thread won't acknowledge.

[smoogatz]

12. Open the books!

Before there's any bailout, firms that are requesting public dollars MUST be required to open their books to the public. That way other lenders can also see what sort of risk they're taking on.

[rvablue]

17. There is another reason here why they could have been denied

On Election Day Massachusetts voters are expected to pass a statewide initiative that repeals the State Income Tax.

Every single politician and agency head is against it, but it got put on the ballot by a small citizens group, and well, who can't resist repealing taxes.

This could have made their creditors very uneasy as they are expecting billions of shortages come Jan. 1st

[beachmom]

23. When did that ballot initiative go on the ballot? Because this credit denial

happened yesterday when the bailout bill failed. Perhaps you are onto something about Mass. being riskier, but that is the point: the credit crunch starts on the riskiest to the least riskiest. The State of Mass. isn't THAT risky in that context, which makes this news troubling.

[rvablue]

42. Dont' know exactly

read it in the New York Times this Sunday.

Don't know when it was placed on the ballot (as far as getting enough sigs), but they are voting on it this Election Day and polls show it is going to pass overwhelmingly.

[cottonseed]

59. Thanks for posting....

I thought only California put unbelievably stupid things on their ballots.

[stillcool]

104. I don't think that will pas...

I haven't spoken to anyone who is in favor of this. We are too close to New Hampshire to not see how their property taxes have grown.

[karynnj]

158. Nice to hear

It also seems that there will likely be some effort to explain why it is such a bad idea via ads and lobbying against it by all kinds of trusted people in the communities. Explaining where the state income tax money goes and what the alternatives would be likely has been done yet. People, in the end, want most of the stuff that the income tax funds.

[amandabeech]

127. Yes, that makes Massachusetts much riskier.

If I were a bank that had to look at loans much more carefully right now, that would look like a bad risk.

Lenders generally want to have some assurance that the borrower has an income stream sufficient to pay back the loan no matter how much MBS the banks have clogging their books.

[OwnedByFerrets]

18. OMG OMG The sky is falling, The sky is falling....

everyone run for your lives. Manufactured by this administration to suck more money out of us. The more we learn about this "crisis" the more we learn that its mostly manufactured to keep billionaires billionaires.

[msallied]

21. Lord. The cognitive dissonance is stifling.

:eyes:

[scheming daemons]

24. Unbelievable how many DUers are economic illiterates.....

Will you please LISTEN TO OBAMA!?

[OwnedByFerrets]

33. Well, I can call you an economic illiterate also

and it changes NOTHING. Btw, most at DU are. I take my clues from economic genius's like Ravi Batra. What economic genius are you taking YOURS from?

[scheming daemons]

36. Our next President.

[OwnedByFerrets]

38. I read the full speech....there were a LOT of IFs in that speech.....

the bill from yesterday was full of fucking loopholes. And congress had NO NO NO oversight. Is that what you want? No oversight??

[scheming daemons]

56. That's not true. There WAS oversight in that bill...

The first $250B would be given out immediately.

The next $100B would be based on the President's discretion... the NEXT President (not Bush)


The final $350B would go out only at congress' discretion.


Congress basically said... half now... and the other half when we see if it is working.

[soothsayer]

60. Feh, they would have snapped up the whole $700B so fast your head would spin

And they'd be laughing all the way to buying up your bank.

[OwnedByFerrets]

72. The oversight.....

The Financial Stability Oversight Board would be charged with ensuring the policies implemented protect taxpayers and are in the economic interests of the United States. It will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.

Put the foxes in charge of the hen house. Yeah, that's real smart. And the compensation oversight of the execs?? Full of loopholes.

I'm through doing your job for ya. Nothing you or I say OR do is gonna change the fact that the wealthy will ram this thru congress with the wording that most helps them.

[JuniperLea]

80. Clearly you didn't read deep enough...

Those tranches are a hoax... the full amount is available upon demand.

[StreetKnowledge]

88. But not enough, and we still have Bush Co. for another four months......

Yeah, but long will it be until Paulson is screaming about how they need that money? About five minutes, at most.

It should be rewritten, and made to include requirements on how much money must stay in the bank, outlawing the most risky operations and busting up the investment banks - keep investment firms and banks separate.

How do you think the banks got the ability to play with such amounts of money? Laws were changed by the "Contract with America" Republicans to allow banks to also be investment firms. They took all the money everyone had put in the bank and went nuts with it, and now they have to get this bailout. If the banks and investment firms had been separate, the subprime crisis woulda hit the banks but not thew investors. The result of this merging of the two is that when the mortgage crisis happened, the banks didn't have the cash to stay operating because the morons on Wall Street had gambled with it all. That's why killed Washington Mutual, which in my hometown (Seattle) is hurting.

[cui bono]

147. No, not exactly right... (see bolded for this point)

This is the story of the downturn and of course the bailout does almost nothing to counter this drop in demand. At best, it will make capital available to some marginal lenders who would not otherwise receive loans. We should demand more for $700 billion.

For the record, the restrictions on executive pay and the commitment to give the taxpayers equity in banks in exchange for buying bad assets are jokes. These provisions are sops to provide cover. They are not written in ways to be binding. (And Congress knows how to write binding rules.)

Finally, the bailout absolutely can make things worse. We are going to be in a serious recession because of the collapse of the housing bubble. We will need effective stimulus measures to boost the economy and keep the recession from getting worse.

However, the $700 billion outlay on the bailout is likely to be used as an argument against effective stimulus. We have already seen voices like the Washington Post and the Wall Street funded Peterson Foundation arguing that the government will have to make serious cutbacks because of the bailout.

While their argument is wrong, these are powerful voices in national debates. If the bailout proves to be an obstacle to effective stimulus in future months and years, then the bailout could lead to exactly the sort of prolonged economic downturn that its proponents claim it is intended to prevent.

In short, the bailout rewards some of the richest people in the country for their incompetence. It provides little obvious economic benefit and could lead to long-term harm. That looks like a pretty bad deal.

http://tpmcafe.talkingpointsmemo.com/2008/09/29/why_bail/

--------------

* Executive compensation at bailed-out companies. Toothless: The plan ostensibly prohibits golden parachute payments to CEOs and other "C-level" execs at bailed-out companies. However, it really only prevents payments on severance deals that are struck AFTER the bailout (specifically, it prohibits these deals completely). There is nothing about cancelling the severance payments that the executives are ALREADY contractually entitled to. What this means in practice is that bailed-out companies will have trouble hiring the best talent...because why would you work at Bailed Out Company A when you could go across the street and get a fat severance deal? It also doesn't mean the companies can't pay their CEOs $500 million a year. IN ADDITION: There's another absurd section that makes all compensation above $500,000 for the three highest paid employees at the company not tax-deductible for the company. This is LUDICROUS. It means the company can pay the executives anything it wants and that the penalty for this will be exacted on the company and its shareholders. (Unless we're mistaken, Americans are furious that CEOs make $50 million a year for running companies into the ground, not that the $50 million is tax deductible).

* The Treasury has complete discretion over the prices it pays for crap assets (the most important provision in the whole document as far as the taxpayers are concerned). "The Secretary make such purchases at the lowest price that the Secretary determines to be consistent with the purposes of this Act." Translation: If the banks persuade me they won't sell for anything less than a sweetheart price, I can give them that price. The only good news: The Treasury has to publicly detail the prices it pays. So if the Treasury is paying grossly inflated prices, the taxpayer has a chance of finding out about it.

* Size: Treasury gets $250 billion now, and another $100 billion when the President tells Congress it is needed (i.e., now). If $350 billion isn't sufficient, the President can tell Congress he/she is authorizing another $350 billion, at which point Congress can issue a "joint resolution" to block it. In other words, the default amount is $700 billion, and Congress could conceivably block the second $350 billion (the rules for blocking it are complex and doing so wouldn't be a cinch).

* VERY STRANGE AND POSSIBLY ALARMING: The SEC has the ability to suspend mark-to-market accounting for financial institutions when it thinks doing so is in the public interest. The SEC will also be launching a "study" of mark-to-market accounting. Mark-to-market has been fingered as one of the villains in this collapse. It isn't, but it sounds as though the SEC may have been persuaded that it is. Without mark-to-market, there's a lot more risk of a Japan-type scenario, where banks live in denial for years about how far up the creek they are.

* Financial industry might have to pay for any taxpayer losses--emphasis on "might." Upon the expiration of the 5-year period beginning upon the date of the enactment of this Act...the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt.

http://www.clusterstock.com/2008/9/analyzing-the-bailout-what-s-in-it-anyway-

[progressivebydesign]

74. I like Obama.. but he's not exactly an economist. But he's wise to get Americans to calm down. n/t

[karynnj]

81. He's not an economist, but he is speaking to many of them

obviously comparing and evaluating their opinions and recomendations. No one can be an expert on everything - so the important question is how does he respond to a crisis. Claming everyone down and getting as much advice from experts on all sides - and having the ability to integrate it - seems good to me.

[Hannah Bell]

114. where did obama get his economic genius credentials, hmm?

[grantcart]

47. actually I am surprised at how many get it lol

[RoyGBiv]

96. ... and seemingly proud of it ...

That's what gets me.

A great number of people have flatly admitted they don't understand what's happening, which is fine. Hell, none of us completely understand it. The blasted financiers don't completely understand it.

But this blatant, silly mocking of a very real, very bad situation is bizarre.. It actually contributes to the problem, imo.

[ClarkUSA]

25. Yeah, I'm sure Massachusetts liberals are conspiring with BushCo to "suck more money out of us."

:eyes:

[PVnRT]

41. AND the reverse vampires

You can't forget the reverse vampires. They're behind everything.

[ClarkUSA]

44. Here at DU, we seem to be infested with reverse intellectual vampires...

Otherwise known as damned idiots.

[beachmom]

28. An uptick in conspiracy theories means an uptick in denial.

Frankly, your conspiracy theory is remarkably comforting. There isn't REALLY a crisis, just the evil ones cooking up a scheme. The reality, that there really IS a crisis is far more alarming. I can't go along with your conspiracy theory, but I understand why you cling to it.

[Virginia Dare]

163. It may have been manufactured, but it is real..

and we will all feel the effects. So get ready. The scary thing is, we could just as easily go the way of Nazi Germany as New Dealism.

[chicagoexpat]

22. gosh, u mean Obama might be RIGHT & 100 anonymous DU'ers might be WRONG? (AGAIN)

[scheming daemons]

26. Amazing, isn't it?

[msallied]

27. Oh but Obama is just being "Presidential," they say.

In other words, he's lying. Apparently this is okay with them.

[defendandprotect]

54. or...

Read what he said...
maybe the crisis was given a little push, possibly to push through this bill.

"...AMY GOODMAN: Congressman Kucinich, what happens if this doesn’t pass?


REP. DENNIS KUCINICH: Well, that’s exactly right. I mean, we need to be ready with plan B, which helps Wall Street restrain some of this bad conduct, which immediately, you know, puts—looks at some of the issues of liquidity that have to do with the policies of the Fed. We had a former head of the FDIC tell a group of congressmen yesterday that the Bush administration has been going around the last few weeks, actually, so tightening up on the practices of banks that they’re forcing them to have bigger reserves, which in a way would, you know, kind of create—help to create the kind of tight money policies that we’re saying we’re trying to alleviate with this bill. So, you know, there needs to be a deeper look at this.


It seems to me there’s a possibility that this crisis has a little bit of manufacture to it. And that really concerns me..."

[chicagoexpat]

67. It worries me that ANY member of congress would be so ignorant about economics

to lead fools astray & be the willing hand maiden of the next depression

[defendandprotect]

77. "Economics" is something created ... as artificial as a dollar bill --

Why do you refuse to have Wall St taxed for this fiasco?

Why permit hedge funds & derivatives to go on creating NEW

need for bail outs?

Why permit NO oversight, legal review - caps on CEO salaries--???

We need to nationalize the banks if things are as desperate as you

say ...

Otherwise Wall St will privatize all of our government...

including Treasury -

and democracy will be gone --


And.. if you've seen the Kucinich video today, you may begin to

understand's Bush seeking to worsen this crisis ---

Whar were Bush/McCain saying a few days ago on this --???




Read what he said...


maybe the crisis was given a little push, possibly to push through this bill.

"...AMY GOODMAN: Congressman Kucinich, what happens if this doesn’t pass?


REP. DENNIS KUCINICH: Well, that’s exactly right. I mean, we need to be ready with plan B, which helps Wall Street restrain some of this bad conduct, which immediately, you know, puts—looks at some of the issues of liquidity that have to do with the policies of the Fed. We had a former head of the FDIC tell a group of congressmen yesterday that the Bush administration has been going around the last few weeks, actually, so tightening up on the practices of banks that they’re forcing them to have bigger reserves, which in a way would, you know, kind of create—help to create the kind of tight money policies that we’re saying we’re trying to alleviate with this bill. So, you know, there needs to be a deeper look at this.


It seems to me there’s a possibility that this crisis has a little bit of manufacture to it. And that really concerns me..."

[MadrasT]

29. This should be cross posted in GD.

K&R

[scheming daemons]

30. Obama took leadership of the bailout today.... his speech in Reno was PERFECT

And the markets responded.


BY HIMSELF, he can flip 15 democrat no votes to yes.... save the economy... and take ALL the credit now.

[slipslidingaway]

37. Sorry that was lipstick on a pig IMO, raising the FDIC limit may

sound good to some people. If you have 1 million you can have 4 banks instead of ten.


Wall Street wants this bill and so does Obama...is that good???


No mention of the derivatives mess.

As for the market, fast down, fast up etc.

[scheming daemons]

58. The $250,000 limit protects mom-and-pop businesses... small farmers.....

[slipslidingaway]

68. Again, raising the FDIC limit may sound good to some people...

If you have 1 million you can have 4 banks instead of ten, that is a convenience, nothing more.


Wall Street wants this bill and so does Obama...is that good???


No mention of the derivatives mess.

Let's just ignore THAT problem, but you can have a few less banks.


And the people buy it.

[defendandprotect]

99. No it's not -- and they did it--!!!

Not good if you understand S&L theft and embezzlements ---

[slipslidingaway]

102. Using the idea of raising FDIC limits to gain support for this bill is

like putting lipstick on a pig IMO, we do not need to pass this bill in order to raise the limits.

Also how much money does the FDIC have to bailout failed banks, and where does the money come from if they run short???

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x7252792

“The bill rejected yesterday was a marked improvement over the original blank check proposed by the Bush Administration. It included restraints on CEO pay, protections for homeowners, strict oversight as to how the money is spent, and an assurance that taxpayers will recover their money once the economy recovers. Given the progress we have made, I believe we are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement. But in order to pass this plan, we must do more.

“One step we could take to potentially broaden support for the legislation and shore up our economy would be to expand federal deposit insurance for families and small businesses across America who have invested their money in our banks..."

[defendandprotect]

109. We want to make sure ordinary citizens are covered ...

but not create wider runway for theft and embezzlement as we've seen before --

[HughMoran]

31. That kinda freaks me out

It also lends credance to those who are trying to tell us how lines of credit and other forms of paper work.

If I can't get paid due to this crisis - then reality will bite me on the ass.

[chicagoexpat]

40. It should worry U -- & u should remember Repukes put us here (w/ a little help of ignorant DU'ers)

[HughMoran]

43. I know the bill sucked in many ways, but this is freaking me out

:scared:

I'm a tough city kid - I've never used that wimpy smily before - this is a special case.

[chicagoexpat]

66. It should -- & u should trust the leaders you trust in a crisis , not uninformed opinion locking

arms w/ the far right wing base that got us into this mess (y'know, the ones who OPPOSE a rescue cause "ekonomiks is just too HAAARRRDD to unnerstand")

[high density]

34. Maine tried to float some bonds last week but nobody was buying

Total bullshit.

[RedEarth]

46. This happen more and more if some type of plan isn't put into effect

....states, cities, counties, big business, small business.. it won't be pretty.

[GetTheRightVote]

55. Fear, we must fear the treasury department now, fear us, fear today's events

:grr:

My my do they really know how to lay it on us.

:grr:

[soothsayer]

61. Just scary how many sensible DUers fall for it. Shoot, if Shrubby had realized economic terra-ism

worked so well, he woulda' tried it long ago.

[OwnedByFerrets]

73. This is the equivalent of them stealing the silverware from

the whitehouse as they waltz out the door.

[girl gone mad]

108. It's just the same few people in every thread. n/t

[Marrah_G]

57. More to come.

If some sort of bail out isn't developed to stabilize the markets, my boss will lose everything he's worked for and I and my college student asst will both lose our jobs in 6 months.

[defendandprotect]

85. The FED just yesterday gave them $630 BILLION ... So...??????

[RollWithIt]

62. Let Wall Street Collapse!!! Errr.... let Main Government Collapse!! Errr.....

Let state employees not get paid? Manufactured my ass.

[Life Long Dem]

76. Let jobs move overseas. Let cheap labor in. Let foreclosures foreclose.

Upon the millions and millions of foreclosures and an expected 5 more million foreclosures happen in the next few years while we still see McSame and Bill Clinton going to S. America to make free trade deals (cheap labor deals).

And the letter 1 1/2 years ago fromObama to Paulson did nothing absolutely nothing. Yes Obama was on top of this in March of 2007 urging Paulson to do something about the foreclosure crisis.

And we have nuts running around asking if Obama is a leader or asking if he is showing his qualifications in this crisis?

[defendandprotect]

83. Why do you oppose having Wall St pay for this fiasco &.remedy & re-regulation?????

[chicagoexpat]

71. HEY!! What happened to my student loan? It just DISAPPEARED all of a suddent

I'm glad I can count on all the DU'ers who claim we should oppose a rescue bill to pay my college tuition for me!

[defendandprotect]

84. Despite FED giving banks $630 BILLION yesterday BEFORE the vote ...????

[chicagoexpat]

100. Yes, you are SO MUCH smarter than Obama, Pelosi, Reid, Frank, Warren Buffet....

You should run for Prea urself? Get the DU'ers who keep posting about what a lousy campaign Obama is running to run ur campaign, ur a shoe-in!

;-)

[chicagoexpat]

101. & btw, I'm sure youc an personally write a check to help Massachusetts & all the other states who

can't get a loan to do business

[defendandprotect]

111. They got the $630 BILLION ... what's the problem ...????

Need hundreds of BILLIONS more, perhaps ---???

[anigbrowl]

130. If you knew anything about economics, you would know what the problem is.

But you don't. Don't you have to post in a UFO thread somewhere? Your meaningless contributions are cluttering up this one. I swear, it's like having a 10 year old running around spouting about something they saw on Tv that they think explains it all. You'd believe Kucinich if he told you that the answer was to toast marshmallows.

[defendandprotect]

172. This is my recommended response ....

for anyone bothering reading your comments ...

ignore --

[Moochy]

174. Solid Advice

a long time on-and-off ignore lister.

[Life Long Dem]

75. Yes,

But I would think now that the highest lender(s)are being taken care of, the lower banks shouldn't be as fearful of exchanging with the top lender(s).

I can understand perhaps worrying about working with each other, but not with the biggest lender's. So I guess it will help but how many won't make it... will be a guess.

Banks and other financial firms have stopped lending money to one another, afraid that their counterparts may have large holdings of such mortgage-backed assets, and could be in the same danger that caused firms such as Lehman Brothers to file for bankruptcy.

[WCGreen]

87. MAss has a repeal the state income tax on the ballot and it looks as if

it has a chance to win.

That could very well be playing into the uncertainty that lenders are seeing.

I'm just saying.

[defendandprotect]

113. I'd like to see ALL the states drop state income tax --

and our NJ sales tax --!!!

Let's keep moving backwards into taxing the rich and moving these

tax burdens off shoulders of poor and middle-class --

[Odin2005]

91. "Manufactured" crisis my ass.

These tin-foilers will be eating crow soon.

[chicagoexpat]

97. Definitely. Elections are about ACCOUNTABILITY

http://loomisnews.wordpress.com/2008/09/30/republicans-give-same-old-whine-in-a-new-bottle/

[spelldmilk]

93. So, just a quick question…

Where did all the money go?
The people don't have it, because they can't pay their mortgages, or their credit cards, or their heating bills, or their student loans. Which is why the global economy is collapsing, right? "We" asked for more money, and promised to pay back more money, than "we" were capable of creating. So, "we" spent more money than we had, but, where did that money go?
The governments don't have it, because they are asking the people for money.
So, where did all the money go? How much have CEO's been making over the last decade?
Why were there headlines about "Record Profits" for the oil industries for the last few quarters? Why are there billions and gazillions of dollars in Sovereign Funds?
Sooooo, where is the money that is needed to prop up the global economy? Why are "we" freaking out about this, why are "we" being asked to sacrifice… uh… everything, or… uh, nothing, or… uh…
Why aren't more CEO's coming out offering to buy stock, in their own companies, with their own money? Why aren't more share holders coming out to discuss this epic financial disaster? Why don't the owners of these businesses that are "too big to fail" have more of a personal investment in their businesses?
WTF is this really about? Funny how it is the sub-prime mortgages, but not the war in Iraq that is the root cause of collapsing American Economy. Funny how the US military budget just received a $680 billion infusion this week, but apparently Massachusetts can't get $400 million. (Sorry, but that is right, right? It was $680 Billion, with a B? I get confused with large numbers in finance, they cease to mean anything after a while.)
Personally, I do believe that something needs to be done, a plan needs to be agreed upon and enacted, but it MUST include strict oversight, of not just business, but of the Office that will be enacting the Plan (Section 8 of Paulson's 3 page proposal, anyone? Scared the shit out of me…), it MUST include assistance to small business owners and individual homeowners, it MUST include ACCOUNTABILITY measures- you need the money, fine, open up your books, and it MUST include perks for the citizens that collectively contribute to the infusion, whatever country that may be.
It has been disturbing to see posts that accuse those against the plan that the House denied as uniformed and/or ignorant. The Plan, I and II, Sucked, and should have been denied. This is not the time for a "With Us Or Against Us" attitude. Enron was just a dress rehearsal.
Like I said, Just a quick question…
But as one posted above, the banks are pushing bank. THIS is hardball. THIS is the time to call out their bullshit. NO ONE on this site wants to see American civilization truly collapse… uh, at least I hope not… so chill. When the Depression hit, the wealthy were fine, the middle class and the poor got screwed, so lets not repeat history. Demand that the wealthy put back into society what they have taken. All we've gotten so far is a bunch of abstract threats, but no one can articulate what is happening because no one knows. There have been suggestions as to what will happen in the future, but aren't these predictions coming from the same "experts" that defined and devised "futures"? Hmmmm…
'Dis she.ite will be fixed, but, as citizens, we don't need to roll over and do whatever the perps want us to. We can demand that "we," the present and the future, be taken care of.
Besides, in the runaway economy that we have been living in for the last eight years, how do we know this wasn't coming anyway? A few suggested as much, and even I, a Philosophy and Literature geek, puzzled over the sustainability of continually increased revenue. Never a plateau, but always higher and higher returns. Always more, more, more… but everything is finite.
Chill, peeps. Get on the horn, and make your voice heard, but stop freakin' out on other people.
Jeez, sorry this was so long.
We've all got everything invested in the present, and "we" are absolutely making an impact on current events, but the ugly needs to stop. Bad mojo, guys, leave it for the freeps.
Always remember "Unknown Terrain for the economy."

[OwnedByFerrets]

103. SS your post got buried....its a great great post...nt

[spelldmilk]

105. Thanks…do you know where all the monies went?

I keep looking in my mattress, but they're not in there…yet. <hic> That's it! The Tooth Fairy took all the monies. Find the Tooth Fairy, find allll the monies needed to prop up the global economy! We can pay back China, and Japan, and and and, Everyone else. Maybe there will even be enough left over so that we can build a new bridge for Minnesota, and have a safe and working infrastructure and Health Care for All! Oh, silly me, floating off into Fantasy Land, again.

I need a drink…

[DeepModem Mom]

94. K&R

[AnnieBW]

112. It's because of Gay Marriage!

See... Massachusetts was the first State to allow gay marriages, so this is God's judgment against them!

Oh, gays... is there anything that you can't solve?

[dapper]

117. Manufactured Crisis....

I'm not saying it is, or it isn't manufacturered.

I do know that I don't want to bail out the banks or wall street.

No one bailed me out when I was in debt. I worked hard, I paid my dues, I paid those fees :-) and I got myself out of debt.... then I made a ton of money and now I'm teetering on debt again! Things will work out for me, I will tighten the belt.

I just expect wall street and our govt to do the same.

Dap

[Eric J in MN]

118. self-deleted

NT

[chupacabranation]

119. Thank you for injecting some sense back into things. K&R n/t

[depakid]

121. Oh, there's no problem at all...

Congress needs to do nothing, because it might possibly benefit a couple "fat cats."

:sarcasm:

[Hannah Bell]

122. Everyone just takes this at face value & runs with it?

>>State treasury officials said the credit markets abruptly froze midday, leaving them $170 million short.<<


"the credit markets" - what is this, exactly? you mean no one could get a loan yesterday? did they "freeze" just at midday, & "thaw" later, or are they still frozen? if so, does that mean we should expect to find everything shut down tomorrow?

if the credit markets are frozen, why is visa still advertising on tv?

the article doesn't educate - read it carefully, there's no real information or explanation - it just hypes the fear.

[chupacabranation]

123. Lord.

"Guffaw. The credit markets don't even EXIST y'all! It's all just a PLOY in order to EXTRACT money for the wealthy class y'all!"

Let me explain, in layman's terms, for obvious reasons.

When people can't get money from borrowing (lenders are wary of lending in a high-risk economy)....they in turn can't pay folks, who owe OTHER people money. The 'interlinks' of the economy, as Bush might say.

This could affect you directly tomorrow. But you don't know it yet.

[Hannah Bell]

124. see, that's what i mean. ok, bright boy - in your own words, what does

"the credit market" consist of. WHO, exactly, does the state of mass. borrow from, & how many options do they have?

for example, "I" can go down to my credit union right now & get a 10K loan. is that part of "the credit market"?

well, it's not frozen. you're telling me *I* can get credit, but the state of mass can't? i call bullshit.

foolish people take things at face value. manipulative people try to get others to take things at face value, & try to intimidate those who ask questions with ridicule - or worse.

so - tell me about the credit markets, smarty-pants. your boiler-plate on inter-bank loans, i already know. but tell me who massachussetts borrows from, since yer so clever.

[chupacabranation]

125. I'm actually a girl.

For starters.

Okay, you just asked me a zillion questions.

For starters, it's a lot easier to get 10k than it is to get millions of dollars. No PhD needed there.

The credit market is the market for borrowing and lending (loans, corp bonds, etc.), embracing credit risk in order to loan to borrowers. Much of this lending is between banks - banks are quite obviously gun-shy of borrowing from other banks, which you say you understand.

Oh lord. This isn't even worth it.

Can you please use the Google?

Thank you.

[Hannah Bell]

148. if you understood it, you could explain it. Massachussets isn't a bank, so

there's no bank-to-bank lending going on.

So, in fact, you have no idea which entities MA borrows from, or who refused it credit, or why.

[anigbrowl]

133. Your credit union is not 'the credit market'

http://en.wikipedia.org/wiki/Bond_market
http://en.wikipedia.org/wiki/Commercial_paper
http://www.marketwatch.com/news/story/fitch-rates-massachusetts-750mm-go/story.aspx?guid={FC483C76-AF1A-41DE-940D-E09AAA258B1B}&dist=hppr

[Hannah Bell]

149. I didn't say it was. I asked the poster to explain who MA borrowed from, & she couldn't.

Neither can you, apparently.

[chicagoexpat]

126. Geez, u can't even read the article! Facts mean nothing in ur world

[Hannah Bell]

151. I read it. It said Ma tried to borrow but couldn't cause credit markets

(unspecific) "froze" (no explanation why or who froze them, or for how long), then this is linked to the bailout, followed by a lot of dire handwringing.

Hyping the fear, slinging the bullshit.

[anigbrowl]

171. IOW, you don't understand it

Look, if I read an article saying 'a person was injured today when roof slates fell off a tall building in a high wind' I don't need the article to explain what wind or gravity or newton's laws of motion are. Similarly, the informed reader of an article like this doesn't need an explanation of what credit markets are, what freezing means and so on.

Translation for you;

Credit markets = buyers of state treasury notes in a scheduled telephone auction

Frozen market = nobody purchased any of the offered bonds

How long = nobody knows for sure; only that bonds were offered for sale and nobody purchased any

Linked to bailout = uncertainty about bank financials means short-term interest rates are going up; MA bonds didn't offer a high enough interest rate to attract buyers

Dire handwringing = states are very large employers, buyers of goods and services, and providers of (public) goods and services. If a state goes insolvent, a lot of people are going to be up shit creek minus a paddle

[anigbrowl]

131. You're just demonstrating your own ignorance

"if the credit markets are frozen, why is visa still advertising on tv?"

BECAUSE STATES< MUNICIPALITIES AND CORPORATIONS DON'T GET THEIR CREDIT FROM VISA OR MASTERCARD.

They issue things called 'bonds' and 'commercial paper' and there is an entire market devoted to this that you would know about if you read the business section, but which you obviously don't know about right now. Instead of going 'he article doesn't educate - read it carefully, there's no real information or explanation - it just hypes the fear' maybe you should think about the fact that articles like these are written for people who don't NEED explanations and breakdowns because they actually know how this market works already.

you obviously don't but like most uneducated people you assume the fault is what you told rather than in your own lack of knowledge. Do me a big favor: take an hour out and look up the following on wikipedia: 'commercial paper', 'libor' 'spread (finance)' and 'bonds'. Then you'll have SOME idea of what the rest of us are talking about.

[Hannah Bell]

152. So why don't you explain it yourself, since you're such a whiz. I can

explain biochemistry to a non-expert. The visa/credit market is my little joke, sorry you don't get it.

I readily admit I don't read the finance section of the paper religiously. But I understand more than you might think, & I also understand the role of deliberate mystification in keeping finance "esoteric".

I've lived long enough not to believe a damn thing coming out of the mouth of the financial sector, without checking it out for myself.

I've also lived long enough to know that people who start discussions by calling people ignorant, uneducated - aren't worth listening to.

[chicagoexpat]

157. "ekonomiks iz so haarrdd! me don't unnerstan why state must borrow...

don't they have my $$ in a mattress? SPLAIN IT TO ME JACKSON!!"

I guess the trolls have to come out of the woodwork every now & then to find more tinfoil for their death ray shield

[anigbrowl]

165. I call them as I see them

I've posted several threads here in an attempt to explain this stuff simply and without technical language, and they keep getting shouted by people insisting on viewing it as a conspiracy theory.

[Hannah Bell]

166. yep, well, i notice you till haven't answered my question.

as for conspiracy theory: people collude. all the time.

[anigbrowl]

168. I have, but you didn't recognize the answer

Once again, the state of MA doesn't borrow from a single lender: they sell state treasury notes at auction. When they say they were denied credit, it doesn't mean that a bank said 'I am not going to give you the $400 million I promised I would, ha ha', it means they offered bonds for sale and nobody was willing to buy them at that interest rate.

[Hannah Bell]

170. ok, that's an answer, thanks.

[BlooInBloo]

132. This should make DUers happy. Everyone gets to go down now.

[anigbrowl]

134. Seriously :-(

Rates of woo are rising nearly as high as the spreads on short-term debt. Maybe we should start a 'wackadoodle' index and publish statistics.

[BlooInBloo]

135. Wouldn't help. I would guess that the there's-no-problem DUers...

are among the most mathematically illiterate.

[depakid]

138. What it would probably take is for some company payrolls to fail

specifically their employers' payroll.

[chicagoexpat]

137. yeah, "don't bother me w/ the facts, ma'm, Ah'm believing what Ah wants to belive cause

eKonomiks iz so HAAAARRRD to unnerstan"

[anigbrowl]

139. Excuse the self-reply

I can't help noticing a significant overlap with the people who didn't understand primary math either.

I've tried posting a bit in the Econ forum but not as many people read that. Maybe we should move the grown-up discussion over there? There seems to be about 10-15 of us who understand the credit market, spreads and so on, but our attempts to have a productive discussion about it are being drowned out. I call conspiracy!

[depakid]

144. "attempts to have a productive discussion about it are being drowned out. I call conspiracy!"

:rofl:

Forget spreads, a lot of these folks don't even know what cash flow is.

That's kinda scary, actually.

<on edit>

I notice that there are two of the anti-vaccination crusaders posting the usual conspiratorial ramblings over in the economy forum.

:eyes:

[Hannah Bell]

153. yeah, why don't you 15 geniuses go off by yourself.

[Moochy]

164. Yeah it'd save us the righteous indignation and heaps of insults

"You just Don't understand" Du's 15 fat cats to everyone else.

"Senator Obama just doesnt understand." McCain

[Hannah Bell]

154. yes, yes. DU destroyed the US.

[many a good man]

140. Our Corporate Overlords will squash us like a bug!

Please don't squash me! I wish I had a stinger!

[jeanpalmer]

143. Congress is in a bind

People expect the government to solve the crisis. So Congress will do something, whether it solves the crisis or not. That's what we're looking at here. They're throwing a $700 billion hail mary.

As someone pointed out above, the Fed has been injecting massive liquidity directly into the system -- $600+ billion. And that hasn't unfrozen anything. Why do you think $700 billion thrown at mortgages will unfreeze things? The liquidity problem is immediate. The bailout plan won't start functioning for at least a month. So the latter will not address the immediate problem. If anything will address the immediate problem, it's the Fed directly injecting liquidity.

[w4rma]

146. Whomever denied the state of Massachusetts credit is making a BAD buisiness decision.

Of course that state will pay back its debts. There is no danger of that not happening. Someone is playing a con-game.

[uponit7771]

159. Yeap, the state can go to other financers too and NO ONE is saying whether or not this has happened

...before.

The similarities to the pre Iraq war talk on the bail-out is glaring

[anigbrowl]

167. Nobody 'denied' them. Let me explain the process.

This is a very simplified summary of how it works, mind.

1. The state has authority to issue bonds. That's a legislative power - chances are you've voted on a bond issue at some time in the past. What you were doing was granting (or denying) the power to the state government to issue bonds on which interest is payable. The bonds are paid off with things like state income taxes, sales tax and so on. It varies from state to state.

2. Once the state decides to issue a bond, it writes up the terms and the bond is then rated by an agency which looks at the state's finances and the offered interest rate etc., and assigns a quality rating to the bond which tells potential buyers how safe the investment is. Most of the time state bonds get a very good rating.

3. After the bonds are issued and rated, they are then sold in an auction. In theory anyone can participate, in practice this is only true if you have lot of money - you need to put down a few million as a deposit to show you're a serious bidder. Usually the bidders are money market funds and the like - that is, fund managers bid on behalf of investors. State bonds are largely boring but safe - so usually the fund managers are the administrators of pension funds and suchlike as opposed to get-rich-quick speculative funds - those invest in high-risk things like venture capitalization and so on. It's not necessarily private money; if the state of Florida had a budget surplus, they might decide to invest 20% of in bonds issued by MA (for example).

4. What's happened in this case is the state of MA has announced their auction and said 'Hey guys! $400 million of General Obligation state bonds for auction, rated at (rating) by Fitch, x.y% interest over 5 years, auction takes place on (day of the week) at 10:30am EST'. Bear in mind that this is a regular occurrence - states do this every month or every quarter. Except this time, nobody put in any bids.

See, with consumer and small business finance, nobody knows who the hell you are so you go to your bank and ask for a loan or a line of credit. If you're a large entity (like a US state) then everyone knows who you are, so you work out how much cash flow you need and then issue notes for other people to buy. It's a bit like companies issuing shares, but the difference between a share and a bond is that share values might fluctuate and are risky, whereas a bond is a contract - buyers are guaranteed to get their money back with a certain rate of interest.

So whenever you see a news story about 'bond defaults' it means that some large entity was unable to honor its bond promises, and since they're large there is inevitably a lot of money involved. This is what happened Argentina about 7 years ago - the country defaulted on its national bond payments and as a result their whole economy froze up within a matter of days because no other government would buy their treasury bonds.

[debbierlus]

150. This is blackmail - give us our money or we will destroy you

Fight back.

[doyourealize1]

169. nice one-liner

[glowing]

156. So, where is Barney Franks from again?

[Imagevision]

175. If the M$M reported on this story - Mccain may as well hang it up - "deregulate"...