Bait and Switch...Paulson really wants to bail out Bad Consumer Debt...

[Junkdrawer]

All weekend, they jawboned how the US Treasury will MAKE money buying Mortgage Backed Securities at 20% discounts, removing the 10% bad, and then reselling for a profit.

Now, we find the REAL target is the Consumer Debt Bubble:

U.S. broadens bad-debt bailout plan

WASHINGTON – The federal government’s pledges to pour $700 billion into buying up downgraded mortgage assets and $400 billion into stabilizing money-market funds may backfire, some analysts say. In the long run, “the downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis,” David Woo, London-based global head of foreign-exchange strategy at Barclays, told Bloomberg News. “As we get to the other side of this, the dollar will get crushed,” agreed John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc.

The Bush administration yesterday broadened its bad-debt bailout plan beyond mortgage-backed securities, as U.S. Treasury Secretary Henry M. Paulson Jr. announced plans to allow the possible purchase of other “troubled debt,” including consumer automobile loans or credit-card debt.

“The Treasury’s thinking is to make it as big and wide as possible, so they have the flexibility to act if need be,” Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, told Bloomberg News. “There have been losses on a whole range of U.S. debts, and as the economy deteriorates in response to the housing slump, those losses could escalate.”

...

http://www.pbn.com/stories/35311.html

Still think this will turn a profit? :shrug:

[Old and In the Way]

1. Or maybe this is simply trying to put a little lipstick on the pig.

Add a little bone to consumer debt to get the package passed. Do you think Paulson or Bush will worry about consumer burdens after they get their bail out money? I think they'll be bailing out of the US economy and taking that capital to other places to keep their financial empires going.

[Junkdrawer]

3. The money will go to the banks, not consumers.

This is to reimburse banks for consumers who declare bankruptcy.

[clear eye]

2. This is a doomed "trickle down" economic bailout plan

That the expansion of the assets to be bought include just about all defaulted loans the large financial institutions are carrying indicates that this is not a situational bailout of some institutions, but a bizarre effort to fix the tanking economy by "trickle down". All these things--credit cards, student loans, loans in general, are failing because the economy, "Main St.", is failing. Trying to fix it this way will make things immeasurably worse.

For the first time in history, there exists the danger that the U.S. economy simply won't be able to afford the debt service (interest, etc.) on all the country's debt, private and public. The outgrowth of such a crisis would likely include a large devaluation of the dollar. It starts a vicious cycle where the "rescue", while temporarily bailing out investment houses and banks, makes the economy worse, so people can't pay back more loans, so more "assets" need rescuing, and so on. In a shockingly short time there will be no way to save the financial institutions, and the money needed for a proper rescue of the economy will be gone. Among the consequences would be the bankruptcy of vital support programs for the elderly and a complete devaluing of their savings.

With the tens of millions of Baby Boomers becoming too old to compete for jobs in a shrinking economy, the country could find millions w/o the means to provide themselves with their basic survival needs. As happened in the crash of the Argentinian economy, formerly middle-class citizens could find themselves homeless and starving.

The only feasible way to rescue the financial system is to do the leanest of rescues while re-regulating, restoring taxation on the ultra-wealthy, corporations, and estates, and providing direct help to the people by job creation including support for the manufacturing sector, which would stem the flow of defaults. This is also the only way to prevent the slashing of vital gov't programs like Social Security and public schooling.

[Indiana_Dem]

4. So detail this scenario out for me please..

I can't visualize what this means. Does this mean that the ones who failed in paying their bills will still have to pay their bills but the only thing different is that they are paying the government instead of the company?? Do they work something out with the person who couldn't pay? OR does the government confiscate everything and then sell it pennies on the dollar to the highest bidder and the government gets whatever can be gleaned from the sale of the asset?

I don't get it? What does all of this mean? How would all of this happen?

I'm on the fence about all of this because I feel like I don't have the whole picture.

I'm somebody who worked 5 years to get out of debt, who is now in ZERO debt and has a substantial savings. I don't mind paying my $2333 to keep us from going belly up as an economy. But from what I can see from a personal standpoint, would I stand to gain if everything just falls apart? Just thinking out loud here....because I'm thinking if it all falls apart I could actually lose big time all of my cash on hand if the currency goes under!!! So I don't know what to make of the situation. I always heard cash is king in a depression. But I'm screwn for paying off my debts and having saved cash if we go into hyperinflation! Am I correct? I get penalized for no debt and saving cash?

[Junkdrawer]

7. You declare bankruptcy. Your credit card company now has to eat, say, $15,000...

of bad debt. They can't sell it to a collection agency. It's just bad debt.

Hank Paulson comes along and gives the bank $15,000 of taxpayer money.

Congress complains, but Hank shows them the legislation.

[Indiana_Dem]

10. So then that means I'm technically helping pay off other people's bad debts!?

That's crazy...and insulting to me who has paid it all off myself and saved.

[Junkdrawer]

11. The bank issued the card. The bank got the interest payments. You pay if it goes bad...

Sounds like a responsible deal to me...


:sarcasm:

[clear eye]

13. He bails them out as long as the Treasury still has money

but as the sinking dollar and lack of job stimulus programs (no money for them) cause more people to go under, the bad assets multiply until the gov't realizes it can't bail out anymore w/o defaulting on U.S. Treasury bonds, and both the financial institutions and the general economy collapse--Great Depression II. This "trickle down" disaster has to be aborted.

[clear eye]

15. You are correct about the dangers of hyperinflation caused by this misbegotten mess of a plan

Contact your Congressmembers now. There are other options. See my post #2 above and #12 below.

[KansDem]

5. I wonder if Americans will view this as a way of alleviating *their* consumer debt?

It sounds at first that the Bushistas won't to erase bad consumer debt, however, isn't it merely giving the banks the money to cover the consumer debt of their "clients?" Wouldn't the "client" have to pay on their bad consumer debt to whomever holds the note?

I wonder how many Americans will think they're getting bailed out!

[baldguy]

6. They've devalued everything else - our dollars, our work, our savings

- now they want to devalue our property. Imagine Manhattan being sold for a few shiny beads again - only this time we're all the Indians.

[Subdivisions]

8. That's one rumor that'll get the taxpayers on board, at least the upside-down ones.n/t

[Junkdrawer]

9. The money will go to the banks, not consumers.

This is to reimburse banks for consumers who declare bankruptcy.

[clear eye]

12. Wednesday is the deadline to impact the bill by contacting members of the JEC

Congress's Joint Economic Committee meets on Wednesday to craft the actual bill that will go to Congress for approval. The key players are the co-chairs of the Committee--Sen. Charles Schumer, and Rep. Carolyn Maloney, both of NY. The full Congress (both Houses) gets to vote on the bill, but in the current crisis atmosphere, there will be little debate and most likely no amendments offered.

Go to website of the Joint Economic Committee and see if your one of your Congressmembers is a member--Senators <http://jec.senate.gov/index.cfm?FuseAction=About.SenateMembers>, Representatives <http://jec.senate.gov/index.cfm?FuseAction=About.HouseMembers>. If they are, contact them today.

The key point is that a "trickle down" bailout of the economy via the banks won't work because it doesn't correct the cause of the epidemic of defaults, but it will succeed in tanking the dollar, making the economy much worse, and eliminating the money needed to actually rebuild the economy.

[TexasObserver]

14. It's called Bankruptcy Court, and it's where businesses go that can't pay their debts.

That is the answer to all these business problems.

[Junkdrawer]

16. Kick

:kick: