tag:blogger.com,1999:blog-2221405275974541103.post9087975748806414481..comments2023-10-15T11:24:38.417-04:00Comments on The U.S. Parliament: The Black HoleJacobhttp://www.blogger.com/profile/14563739841535780915noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2221405275974541103.post-892298242599174282008-10-10T11:52:00.000-04:002008-10-10T11:52:00.000-04:00I don't know for sure, but the writing is on the w...I don't know for sure, but the writing is on the wall. A lot of things that have happened lately have been illegal, such as the AIG bailout. This is a bona fide crisis, and everything is grey as of now. There is no clear legal authority and everything is up in the air. At this point, the IMF and the World Bank are getting involved, and you better believe they're not going to let some snot-nosed Goldman Sachs trader run the show.Jacobhttps://www.blogger.com/profile/14563739841535780915noreply@blogger.comtag:blogger.com,1999:blog-2221405275974541103.post-71027517184432770492008-10-10T11:11:00.000-04:002008-10-10T11:11:00.000-04:00Jacob,How do you know that paulson's young colleag...Jacob,<BR/><BR/>How do you know that paulson's young colleague from Goldman is no longer running this bailout program?<BR/><BR/>How do you even know what they are going to do with the money? Who is controlling it? Based on what I've read, congress doesn't seem to want to any oversight responsibility over this mess.<BR/><BR/>Who has legal control over this money?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2221405275974541103.post-44047610852772612252008-10-10T09:57:00.000-04:002008-10-10T09:57:00.000-04:00Anonymous,as of now, things have changed radically...Anonymous,<BR/><BR/>as of now, things have changed radically. The Treasury will probably no longer buy the troubled assets, but instead buy stocks in banks. The corruption in the original plan was made even clearer when Paulson hired an old pal from Goldman Sachs with only a few years experience to run the program. All that is gone now. It seems that the U.S. will now do what the Swedish government did 15 years ago: partly nationalize banks. This is the only thing that has a real chance of working, so that is good.Jacobhttps://www.blogger.com/profile/14563739841535780915noreply@blogger.comtag:blogger.com,1999:blog-2221405275974541103.post-46370124166815958492008-10-09T19:05:00.000-04:002008-10-09T19:05:00.000-04:00Jacob:I found your blog by reading the comments se...Jacob:<BR/><BR/>I found your blog by reading the comments section in the NYT and I must say that you are really helping me grasp what is going on. You are able to put this issue in plain, simple English that an average non-economist like myself can understand.<BR/><BR/>Keep writing and I'm sure your readership will pick up greatly.<BR/><BR/>Now, onto a question I have. What exactly is the treasury going to do with this money? are they going to literally wire it into the bank accounts of firms like Goldman and AIG?<BR/><BR/>And if these financial firms ALREADY knew that the $700 billion would not cover their debts, why did paulson even bother printing the money? Wouldn't it have been better for paulson to use the money to help homeowners stay in their homes?<BR/><BR/>I look forward to reading your answer.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2221405275974541103.post-27274845549676643452008-10-09T11:40:00.000-04:002008-10-09T11:40:00.000-04:00Lisa, although it is true that there is real prope...Lisa, <BR/><BR/>although it is true that there is real property somewhere behind these securities, that is not necessarily relevant. When you buy a security like this, you're really assuming a lot of risk while hoping that everything will be OK. Imagine that you want to buy a nice cat, but you don't have any money. You go out in the street and pick up a feral cat, bring it in to your home and hope that it will somehow turn into a nice purring cat. Sometimes it does (I have a very nice cat that came from the streets of The Bronx), but often it does not. The cat may have pretty eyes and nice fur, but that doesn't make up for the fact that it would be impossible to keep in the house. So it is with these securities, they cannot be broken down into pieces, they are relevant only in their totality. Apart from the fact that a lot of houses have lost 50% or more of their value, som have lost ALL of their value, because they have actually been torn down.<BR/><BR/>In Europe, there is a solution to this problem. The way that a lot of European banks solve this problem is to offer what is called "covered bonds". That is similar to mortgage securities, but as soon as one piece of the totality goes bad (one house loses value, for instance) it is immediately taken out of the pool, and several banks share that cost at once. <BR/><BR/>Of course the Treasury knew about the problem with the credit default swaps before devising the plan. The bailout plan was never intended to help taxpayers, it was intended to bail out individual companies, executives and shareholders. To say that it will eventually bring back value to people's 401(k)s, for instance, is laughable.Jacobhttps://www.blogger.com/profile/14563739841535780915noreply@blogger.comtag:blogger.com,1999:blog-2221405275974541103.post-55882652758496117232008-10-09T02:03:00.000-04:002008-10-09T02:03:00.000-04:00Jacob, I'm not very good with economics but I'm tr...Jacob, I'm not very good with economics but I'm trying to understand this situation because I find it fascinating. Let me ask you this-- You say these toxic securities/assets are worthless, but these securities represent property or real estate somewhere, don't they? What exactly makes them worthless right now? Because they're lumped into such big bundles? <BR/><BR/>Also, are you saying it was just *recently discovered* that $100 trillion of insurance (default swapage) was purchased against these securities? And if so, is this something that the Treasury Secretary knew about before he devised the bailout plan?<BR/><BR/>Your article is fascinating.<BR/><BR/><BR/>-LisaAnonymousnoreply@blogger.com