[~amicus~]

There was a great article in the Oz about how sucessive Labor and Liberal governments resisted wholesale deregulation of the financial sector, thank god. Hopefully this will see us through. Our loans are not as dodgy.

ETA: Melissa, what I find incredible is that the bail out really amounts to the socialising of the financial sector. I guess capitalism in its most rampant form really doesn't work. How about that?

This post has been edited by ~amicus~: 28/09/2008, 09:53 AM

[Melissa4444]

"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."

It's this line that gets me.

non reviewable....may not be reviewed by any court of law..

[~amicus~]

So, I guess there finally goes the rule of law. Oh well, we had it good for a while there.

[miriams]

The US hasn't rule of law for some time now ....I think we are witnessing the most massive theft in history. I don't think people understand how much the robber barons absolutely hate ordinary people. They despise them as weak and resent them for their 'folkish morality' where lies, deceit, unjustified wars and outright murder are still regarded as wrong rather than as signs of strength and civilization.

[candida]

I guess capitalism in its most rampant form really doesn't work. How about that?

This amuses me, in a sad, ironic way...

[Melissa4444]

I think that Chris Dodd's plan is simply safer. I have difficulty with the concept of that section of Paulson's proposal. I don't pretend to know nearly enough about economics ( ) to be able to comment too much on the rest, but I find it hard to believe there aren't more people freaking the hell out about section 8.

From here.

Sen. Dodd's proposal includes a well-balanced provision for judicial review. His proposal would subject the Treasury secretary to the normal standards customary in American administrative law. Courts would not be permitted to substitute their judgment for that of the secretary—that's the part about how Treasury would only be on the hook for a decision that was arbitrary, capricious, or an abuse of discretion. But courts could be called upon to police such an abuse or a departure from the rule of law. That, of course, is their traditional role.

[*LucyE*]

Any comments on this 'Calling in a loan'. Could that happen en masse, even if you have been faithfully paying off you loan?

This really depends on how bad the financial markets get and how nervous the banks get. In Australia, we should be fine especially if you are with one of the big banks because thanks to the Australian regulations, the banks are tightly monitored to make sure they have a safe % of cash reserves so they shouldn't get into liquidity problems. Also, the fundamentals of our economy are strong and if anything, should we end up in a recession, interest rates will go down and they will be encouraging people to take out loans.

The people who will have problems are those that the bank identifies as risky and to get some of their investment back, the bank would rather take a potential loss and 'call in the loan' rather than risk losing it all.

For the smaller lenders who don't have the back up the big banks do, they are more vulnerable and therefore their customers are too. Again, in Australia they should be pretty safe with all our regulation and the government's willingness to help. The problem for them would be if they had issues raising cash to continue their lending which generates their income to pay for their costs. They would risk becoming insolvent and potentially collapse. If they could find someone to buy them out, the new (assumption is it will be a bank) owners would just take on the customers with some rejigging. If no one wanted to take them over, and they were insolvent, then the company's creditors will be after all the cash they can muster and so may call in loans. This is a worst case, and highly unlikely scenario in Australia.

Things are much clearer now but I still say that all this will affect some, it won't affect others. I do not believe those who say "it will affect every family" - after reading all the posts it looks like it will not affect every family in a negative way.

No, it won't affect everyone in a negative way or to the same degree, but the ones it will hurt most are those who are already some of the most vulnerable in our society. It will affect our society which is the most damaging cost of a recession regardless of how many $million/billion/trillion is lost in economic terms.

What are your thoughts on Section 8 of Paulson's plan? Does it make you nervous? Or do you think the concern is a beat up? I have to confess that it freaks me out. Handing that kind of power to the Executive Branch like that, with no real oversight seems like an incredibly foolish thing to do.

To be honest, I don't know much about the bailout plan other than what I've seen on the news and read in the major papers so don't really feel like I can comment on the details. On an ideological level, I question whether the government's decision to get involved is the correct one but I know that pragmatically, they need to do something. From what I understand, if this goes through, the US government will be in control of approximately 90% of the US mortgage market. That sounds like a lot of government intervention and I'm not sure if it's in the right way.

It's a moot point now but re section 8. Although it seems like a lot of power to give the executive branch, at the same time I understand that they can't really have congress or the judiciary being able to pick through the nitty gritty of day to day business decisions. It would become too politicized and allow for exploitation by the political parties. That's partly why I don't think government has any role in running businesses. My concern is more about what else the government is doing to prevent this sort of problem happening again rather than this one bail out. The way Bush has been pitching it, this will be all that's needed to save the world. I haven't heard anything about fixing their archaic regulatory system which just hasn't kept up with the changes in the 'new' economy. And with the laws that were in place, the Federal Reserve (with pressure from the White House I assume) did nothing to actually enforce them such as the predatory lending which led to the subprime crisis.

Some have commented that this is a failure of the capitalist system but there hasn't been a true operation of the market at work. It is more of a case of the government helping out those at the very top to make a crap load of money at the expense of others. There hasn't been transparency in the US finance sector and there hasn't been appropriate government (not any particular level of govt) oversight. The government's role is to try and create a level playing field with the same rules for everyone and to enforce rules so that even if there isn't perfect information, at least there isn't blatantly imperfect information. I mean, this is the country that passed legislation to reduce the fiduciary obligations of company directors, accountants etc so that individual investors could not sue them for misleading claims. It's also the country that has partially removed the barriers between investment and commercial banks but without putting in place any other sort of regulation. This has essentially created an in between banking system that wasn't accountable to anyone (and the investment banks now want to make this official!).

Bush also had the chance to reform Frannie Mae and Freddie Mac back in 2005 but he avoided it because he wanted them to look inviting for investors as they tried to privatize it. Seriously, even before this all came crashing down, there were people who were amazed that the US finance sector was allowed to carry on like this. The re-parcel-ing of subprime loans, it didn't take a genius to workout that they were 'sub prime' and likely to be worthless. That's why they were broken into small packages and on sold to try and minimize the pain once the loans weren't paid. Anyway, I'm rambling and could go on all day about the flaws of the US

[Char]

Well the bailout plan was rejected. What now?

THE share market has fallen more than 5 per cent this morning, following the biggest ever single-day point decline on Wall St overnight.

Wall St suffers worst day since 9/11

The bright side?

Oil prices plunge after bailout defeat

This post has been edited by Char*: 30/09/2008, 11:05 AM

[chat]

Well the bailout plan was rejected. What now?

I must say I was rather stunned to hear this news this morning

[Franoir]

How much has the war in Iraq cost to-date?