U.S. Congress delays Oct. 3, 2008 bailout a second time, as successful brinksmanship?

http://www.nbcnews.com/id/26987291/.../t/bush-signs-billion-financial-bailout-bill/

Friday, Oct. 3, 2008

‘ . . . the measure ended up comfortably passing the House by a vote of 263-171 after members who voted to kill it earlier in the week came around to a Senate version . . . ’


‘ . . . Twelve switched votes were needed to pass the bill; in the end, 58 House members signed on, including Zach Wamp, R-Tenn.

‘“We’re out of choices. Our backs are up against the wall,” Wamp said. . . . ’
What if the U.S. House practices brinksmanship a second time?

1) You get a better, more popular bill. The recovery is smoother and better understood,

or​

2) The U.S. economy crashes and burns. You think the 2008-2009 Recession was a big deal? You ain’t seen nothing yet!
 
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If things had declined another month or two I'd have petitioned for business bankruptcy later in 2009. Probably also have sold my last rehab project house at a loss, vs the 4-5% net profit I got. I entered the Construction Recession a couple years earlier in fairly good shape, but many of my peers were not prepared & were out of business. A lot more of us were near going under while Congress continued to be in denial.
 
I think 2. tho I am in the camp of letting the big banks fail and bailing out the people. But I don't know how we get that to happen in the climate of 2008. Also I was not someone who really was at much risk in 08 work wise or money wise.
 
If things had declined another month or two I'd have petitioned for business bankruptcy later in 2009. Probably also have sold my last rehab project house at a loss, vs the 4-5% net profit I got. I entered the Construction Recession a couple years earlier in fairly good shape, but many of my peers were not prepared & were out of business. A lot more of us were near going under while Congress continued to be in denial.
I’m glad you were able to make it. And I hope you know that I’m all in favor of a good baseline for the overall economy, right?

I’m mainly asking, could Congress have negotiated a better deal. However we wish to define that (putting strings on executive bonuses, prepping steps to break up the big banks, etc)

I’m remembering you were in home remodeling and refurbishing, and would be interested in what percent of your clients were:

single-home owners,​

investors who seemed to have the resources,​

investors who were stretched thin.​

Even though I can see how it could be blurry, blendy between the last two categories.
 
The DOW lost 780 or 7% on trading the day after the first bailout attempt failed, and that was the lowest point drop of the markets that day. A second failure right after would probably signal to traders that Congress was actually serious about this, and probably lead to a general market collapse.
 
https://www.princeton.edu/ceps/workingpapers/243blinder.pdf

Lesson # 5: Fraud and near-fraud can rise to attain macroeconomic significance.

' . . . What I call "near-fraud" is a moral term, and near-frauds were rife in the booming US mortgage market of 2004-2006. All this was bad, but I think most of us thought that fraud and near-fraud were in the rounding error—not something that could have consequences on a macroeconomic scale.

'We were wrong. . . '
This is economist Alan Blinder, indirectly saying why it would be hard to put the Wall Street crooks in jail.

But a better bill might give citizens some of the other things they very much want.
 
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I think 2. tho I am in the camp of letting the big banks fail and bailing out the people. But I don't know how we get that to happen in the climate of 2008. Also I was not someone who really was at much risk in 08 work wise or money wise.

The problem is if the big banks fail you have a lot more little people to bail out when you get to them. I would have bailed them out, took them over, cut them up and resold them on the open market.
 
I think 2. . .
The DOW lost 780 or 7% on trading the day after the first bailout attempt failed, . . .
I agree bad things are possible, even likely. And if I had been a member of the U.S. House, I would have voted for the bailout, too, . . . hell, maybe even the very first time!

but,

I would like to work the side of other the street, too! :p The possibility that Congress plays a better hand of poker so to speak, and gets a better bill both in terms of policy and politics. The double daily as it were.

One example, serious strings are attached to prevent corporations from paying big bonuses until they pay back the damn money. Second example, some individual homeowners get eviction protection, but not big investors (or one home only, up to a cap). And most importantly, the beginning steps are taken to use Sherman Anti-Trust or similar, in a very lawful, orderly, and determined way, to break up the big boy banks.
 
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What better and popular bill than rescuing the world from potential misery of the Second Great Depression?
And, in those terms, of course hugely important, as I'm sure you and I both agree.

But as time goes by, less and less popular. Maybe once the bridge doesn't collapse, we wonder if it was really necessary to save it. Maybe a phenomenon similar to blaming the messenger?

And in a scant few months, a lot of the populism went to anti-Obama. In retrospect, we may have been unlucky that this happened during a time of political transition. Might have been better if it was a year with no elections, not even Congressional.
 
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And, as we both know, this second step did not happen. And maybe we could start with, the urgent gets down, not the important.

True, and nationalization should be done reluctantly and shouldn't last long. I would take them over just long enough to transfer the CDOs to the Fed and then chop them up and sell the pieces. I would then ban the bundling of loans.
 
I’m remembering you were in home remodeling and refurbishing, and would be interested in what percent of your clients were:

single-home owners,​

By 2008 90%

investors who seemed to have the resources,

Those guys were hunkered down. Doing asset preservation. Also I limited myself on the commercial side. The over reached investors we're failing right and left long before the crash. It's was their accelerating failures that made the crash so much worse.​
 
...
I would like to work the side of other the street, too! :p The possibility that Congress plays a better hand of poker so to speak, and gets a better bill both in terms of policy and politics. The double daily as it were.

One example, serious strings are attached to prevent corporations from paying big bonuses until they pay back the damn money. Second example, some individual homeowners get eviction protection, but not big investors (or one home only, up to a cap). And most importantly, the beginning steps are taken to use Sherman Anti-Trust or similar to, in a very lawful, orderly, and determined way, break up the big boy banks.

If you examine the bank restructuring of the Great Depression by the New Dealers, and the close out of the wreck of the savings and loan industry post 1987, you will see the priority was to preserving home ownership. There was a lot of attention to keeping the homeowners out of foreclosure. Where that was necessary the priority was to reselling the houses individually to home buyers. Selling off foreclosures enbloc as packages was kept to some sort of minimum. Post 2008 The Homestead policy was largely ignored by the contractors who did the grunt work of resolving failing mortgages. The owners were evicted, the houses sold in packages to investors working in conjunction with the bailed out banks. This is one reason it took so long to clear the market of empty foreclosed homes. The investment companies and banks were swamped with a mass of empty houses they were unprepared to deal with. They seldom had a well run department for proper custody and organization. Loan officers were handed a cabinet full of documents for dozens or hundreds of homes and told they were now custodians, often as a additional job. Then eight months later the case files would be passed on to another guy who had no clue what was in them. They lacked the experience and company support. So it took five+ years to clear the is mass off their books. A large portion of these houses were neglected while in receivership. In my home town the city got fed up and started condemning the worst cases. Many they ran through the entire condemnation and resale or demolition of the homes with out the Receiver, the responsible bank or finanical entity responding. One home owner watched the house next door decay, the city condem & demolish it, and he was able to purchase the empty lot to expand his lawn & garage. Six months after he had acquired title a representative of the finance company came knocking on the door trying to locate a house he'd been given responsibility for. The homeowner explained the situation & showed the nice young man the documents.

In the late 1930s home ownership started to recover, & rose in the following decade. Post 1987 home ownership stabilized and began recovering the losses of the late 1980s. The numbers for ownership in relation to previous decades don't look good for the past 8-9 years since the crash of 2008.
 
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If you examine the bank restructuring of the Great Depression by the New Dealers, and the close out of the wreck of the savings and loan industry post 1987, you will see the priority was to preserving home ownership. There was a lot of attention to keeping the homeowners out of foreclosure. Where that was necessary the priority was to reselling the houses individually to home buyers. Selling off foreclosures enbloc as packages was kept to some sort of minimum. Post 2008 The Homestead policy was largely ignored by the contractors who did the grunt work of resolving failing mortgages. The owners were evicted, the houses sold in packages to investors working in conjunction with the bailed out banks. This is one reason it took so long to clear the market of empty foreclosed homes. The investment companies and banks were swamped with a mass of empty houses they were unprepared to deal with. They seldom had a well run department for proper custody and organization. Loan officers were handed a cabinet full of documents for dozens or hundreds of homes and told they were now custodians, often as a additional job. Then eight months later the case files would be passed on to another guy who had no clue what was in them. They lacked the experience and company support. So it took five+ years to clear the is mass off their books. A large portion of these houses were neglected while in receivership. In my home town the city got fed up and started condemning the worst cases. Many they ran through the entire condemnation and resale or demolition of the homes with out the Receiver, the responsible bank or finanical entity responding. One home owner watched the house next door decay, the city condem & demolish it, and he was able to purchase the empty lot to expand his lawn & garage. Six months after he had acquired title a representative of the finance company came knocking on the door trying to locate a house he'd been given responsibility for. The homeowner explained the situation & showed the nice young man the documents.


Sometimes they didn't respond because the property was less than worthless to them. For example, what is Inner City Detroit property worth? In many cases less than nothing. The property tax and liability insurance costs more than the property is actually worth.
 
Sometimes. In the case of Lafayette the condemned properties identified in the newspaper articles were all marketable. I was still following the market closely & watched West Lafayette houses still with market values of $300k to $700k sit unoccupied and unmaintained for 3-5 years. The receivers were hard pressed to keep the lawns mowed let alone repair broken windows, rotting roofs, & vandalism. Down the road the small city of Frankfort took a slightly different approach developing a aggressive policy of fining and prosecuting owners for neglect. This intolerance of broken windows, missing doors, fallen gutters paid off. Intially local 'business men' complained bitterly over how the city made the rental business unprofitable. But, getting the empty houses secured and repaired pressured the drug users and squatters into moving out, and pressured the banks into action.
 
True, and nationalization should be done reluctantly and shouldn't last long. I would take them over just long enough to transfer the CDOs to the Fed and then chop them up and sell the pieces. I would then ban the bundling of loans.
I think we have some area of overlap, at least as far as government and citizens addressing clear market failure.
 
. . . One home owner watched the house next door decay, the city condem & demolish it, and he was able to purchase the empty lot to expand his lawn & garage. Six months after he had acquired title a representative of the finance company came knocking on the door trying to locate a house he'd been given responsibility for. The homeowner explained the situation & showed the nice young man the documents. . .
Incredible!!!

I’m glad he had the documents. I suspect the company’s going to remain so disorganized . . . well, at some variable time from six months to three years, another diligent representative from the company will come to visit.

I hope he’s able to find ways to continue to find it quirky and humorous.

And amazing how many institutions are so poorly run. I’m sure you’re heard how many avoidable errors a hospital makes, most of them don’t cause patient harm, but some of them do. It’s valuable to have a friend or family member there, just with a very light touch, making sure the important things are done right. But even this friend or family member has to take breaks. I tend to think engineering is a full generation ahead of medicine, but even there, some mistakes, oversights, missed opportunities.

And just in general, how few human endeavors really have a healthy interchange between theory and practice.
 
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...
And amazing how many institutions are so poorly run. I’m sure you’re heard how many avoidable errors a hospital makes, most of them don’t cause patient harm, but some of them do. ...

Does cost us a lot of money. The primary goal of the present business model hospital system is the maximize revenue. Optimizing patient outcomes is forced on the current medical system by the insurance companies, commercial and Medicare, who's incentive is to reduce costs, which can be done by improving patient outcome among other things. It may be a pact with the devil, but the insurance industry is a ally in getting some semblance of useful healthcare in the US. The decline of city, county, and state subsidized 'Charity Hospitals' and local county of state public health support in the past half century has been in direct proportion to above inflation increases in health care costs.

A ironic fact is the middle class who are being beaten by health care costs have retirement funds which include & depend on the revenue stream from including the commercial health care industry and insurance industry in the portfolios. So they get a few percentage points back on what they pay out for insurance and direct HC costs.

One can find substantial savings on your own and improvement in your healthcare, but that requires a lot of hours researching treatments, pharmacology, finding accurate cost data, ect.. ect... smart & educated stay at home mothers have the time & skills for that, but most of us already have a calendar already crowded with survival tasks.
 
. . . Optimizing patient outcomes is forced on the current medical system by the insurance companies, commercial and Medicare, who's incentive is to reduce costs, which can be done by improving patient outcome among other things. It may be a pact with the devil, but the insurance industry is a ally in getting some semblance of useful healthcare in the US. The decline of city, county, and state subsidized 'Charity Hospitals' and local county of state public health support in the past half century has been in direct proportion to above inflation increases in health care costs. . .
I am pretty keenly interested in when markets work well, and when frankly, they don’t.

These days I like the East Asian Miracle (circa 1960 - present) as a major example of economic growth, engaged government, and maybe actually somewhat of a genuine third way — other than merely landing at a given point on the number line between capitalism and socialism.
 
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