Bailout plan voted no

[gamecock43]

So the Bailout plan did not pass- much to the surprise of many people. From what I heard- this plan was going to work and people were counting on it to pass. So... Now what? What is in for the economy? The political climate? The financial industry? Us?

[jlvkfyang]

Lots of good questions. I am wondering too. For those who have the brain power, can they explain what the package would have done for the average consumer? Also, if there is like a list of things it is suppose to do. I would like to see that. If you can post info or a link it would be appreciated. Thanks.

[gamecock43]

I have been following the plan and I (as a rookie) understand it as: the govt was going to pay for the failing mortgages at an inflated price. This way the banks would be restored back to their healthy wealthy status and be able to lend money, and keep Americans faith in the system.

Without the bailout plan, many banks are overextended in lending (meaning they lent so much money and dont have enough payments coming in to pay operational fees) and are therefore failing.

This means that banks will not lend any more money because they have nothing to give. Homeowners cannot get mortgages. New businesses cannot open. Businesses cannot expand ect.

The BIG banks that support the giants in the economy like insurance companies, big business lendings..are failing too. Meaning that if a giant like AIG goes down- then everything AIG supports (I forget who) fails too.

In addition, people are afraid of the stock market and pulling out like crazy. They are pulling their money out of banks,they are pulling out of stocks. They are putting their money in vehicles that basically earn them 0% interest because at least they wont lose it. But the chaos is causing banks to fail worse.

businesses are failing because no one will invest in the companies. Peoples belts are tightening because no one has extra income from intrest payments, or stock gains. And now jobs are in danger because businesses have no ability to get loans, and no one investing in them.

And the foreign markets wont touch America with a 10 foot pole. They all pulled their money out of American stocks too.

My question is: Everyone PLANNED for this to work. This seemed like a no brainer to pass. Everyone was panicked to create the bill. Why the panic? What is in store for America to the point that this bill became priority number 1? What is going to happen?

[glock35ipsc]

Thank God! I hear this from Pres Bush this morning, and puked in my mouth a little:

"With this strong and decisive legislation, we will help restart the flow of credit so American families can meet their daily needs and American businesses can make purchases, ship goods and meet their payrolls."

Isn't credit (debt) what go the country in this mess to begin with??? This is telling the public to go into debt so you can meet your daily needs (food, utilities, housing), and so businesses can stay open. If my business relied on credit to make payroll, I would hope we would close the doors if we ARE NOT MAKING A PROFIT!!

Yeah, that's a great plan. Fight debt with MORE debt! Some of these institutions NEED to fail. Not for revenge, but to "clean up the gene pool" so to speak. The weak ones need to fail, the strong will survive and thrive.

No handouts. No golden parachutes. I prefer the Republicans plan of the government providing insurance for the distressed assets, and make the banks keep those assets and do their best to sell them.

[Scanner]

It's really robbing Peter to pay Paul.

What does it mean? Well, it means the tax bill won't go up for the average American anymore than it already has.

But in a trade off, it probably means a serious recession is on the way. No credit means no businesses have a harder time operating.

Maybe I can "sell" my credit line, like a subletter and make money

[Merch]

I believe glock35ipsc hit the nail on the head. That the biggest contributor to this mess was leverage or easy credit. The issue is that the asset were used a collateral to get more capital (read debt). When the underlying capital started to reprice (read lose value), more money was need by these firms to meet obligations.

Last year you saw the start of this unraveling when all these financial institutions went out and started raising more and more capital through preferred stock and direct ownership in them.

So why did this fail? Well, in my opinion, the votes were there and there were a number of reluctant republicans. Nancy Pelosi gave a speech that pretty much blamed Bush and the republicans right before the vote while praising Clinton. This caused those reluctant republicans to vote no.

Now almost 40% of democrats voted against it an 67% of republicans voted against it.

Hopefully, congress will look at this as an opportunity to pass a bill that has more support on both sides.

[tripods68]

I'm beginning to doubt this $700 Bailout will ever going to happen. We already bailed out AIG, Fannie Mae-Freddie Mac, just loaned $25 Billion to Detroit auto industry, cash infusion in billions by the federal reserve, FDIC, and billions more other foreign central banks and countries. When enough is enough? THere should be more debate on this with SOLID bipartision plan to address both parties concerns. They shouldn't just rush this bill just to calm Wallstreet.

[glock35ipsc]

This sums up my thoughts quite well:

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com

[financestrategy]

I agree with Merch..This bailout package will get approved over a period of time...I believe Mr Bush will definately will be able to convince his side of republicans to vote for the package...I am not saying that US Govt wants to do this however they do not have any other options left to avoid this global turmoil in financial markets. When I get up in the morning these days I just wonder which bank failed today....I am myself a banker so I think this approval of bailout package will definately install some confidence in the markets