No Bailout, Stock Market Collapses
The Dow Jones collapsed after the U.S. House of Representatives voted against the bailout bill. It ‘closed the day down 777.68 points, or 6.89 percent, beating its previous record for an intraday drop of 721.56 points, set during the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.’
“This is panic, and fear is running amok,” one trader told CNBC. “We are in a classic financial meltdown, and it’s panic-based. We’re seeing panic selling.”
For those who are wondering: 6.89% means that $1.1 trillion was lost on one day. That’s 1.5 as much as the entire bailout plan would have cost.
"That’s 1.5 as much as the entire bailout plan would have cost."
Um, the Federal Reserve has already created over 600 BILLION dollars in new money for the bailout from previous actions:
http://www.businessweek.com/ap/financialnews/D938OP60B.htm
– $200 billion for Fannie Mae and Freddie Mac — $85 billion for AIG — $29 billion for Bear Stearns Cos. — $300 billion for the FHA "Hope for Homeowners" programUm, how much credit do we need to create to ‘fix’ the markets?
Are you sure another $700 billion would be enough?
No. We might be on the hook for as much as $1.5 trillion. But compared to the cost of a depression, it’s still a steal at twice the price. This is especially true if you remember that we would stand to gain much of the bailout money back after the government was able to eventually sell the assets that it obtained during the bailout.
"it’s still a steal at twice the price" (emphasis added)
At least we agree on that part…
http://www.forbes.com/markets/equities/2008/09/29/federal-credit-financial-markets-equity-cx_cg_0929markets16.html
"Under the new measure the Fed will boost the amount of 84-day cash loans available to U.S. banks to $75.0 billion from $25 .0 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction. In the end the Fed said the move will triple the supply of 84-day loans, to $225.0 billion, from $75.0 billion."
Another $200 billion in new credit…
So… the market gets $200 billion of the $700 billion it was hoping for and… it still drops like a rock…
You sure MORE money (credit) will solve this crisis?
As I explained on the other thread, liquidity is only half the problem. The other problem is the confidence deficit caused by the debt valuation dilemma. The bailout is the only proposal I have heard so far that seeks to address BOTH elements.
And no, it is not a guarantee to work. No one is claiming that it is, so you guys on the critics’ side can drop that dishonest little strawman any time now. But it is the only comprehensive option that has even been placed on the table. The "let the markets collapse" option proposed (either implicitly or explicitly) by free market religious zealots is guaranteed to be far, far more costly.
Question about this…The bailout failed the first time it was brought to the House. Since the Senate attached the bailout as an amendment to another House passed bill that was pending in the Senate. The new bailout version had new taxes, so according to the Constitution is it true that it should not have originated in the Senate?
I am forced to agree with this:
" But compared to the cost of a depression, it’s still a steal at twice the price. "
Why does it seem lately that (Americans anyway) are "forced into” things that we have no real choice about. (the other recent time this occurred was the war in Iraq) Why do I get the general sense that Vinny and Rocco are "protecting me", at a hefty fee, and If I don’t "find my checkbook" in the words of Rodney Dangerfield in Caddy Shack I may find that their protection may lapse, and by coincidence I get my legs broken? When will we have a choice we want to make? Am I alone in this?