Wasn't we supposed to "buy" bad mortgages with the first so called Tarp?

[blueinindiana]

Call me a cold hearted republican but I am of the opinion the government should not have given a bank or any other company a dime. If they can't make it on their own then they should go bankrupt and sell their assets to another competitor and if its a bank let the FDIC go to work.

That being said I remember all the talking heads and so called experts say how this mortgage buy up would be good thing using a "reverse auction" yadda yafdda yadda.

Of course the money went straight into the pockets of CEO's and in to banks overseas.

So now we are supposed to fork out trillions of more dollars most of which will be sucked up by the same vermin who put us in this mess in the first place?

This whole bailout and stimulus crap is just that crap.

I blame most Democrats and all Republicans for this disgusting theft.

[valerief]

1. Don't forget the Republican slush fund so that they can steal ALL the elections

from now on.

[Lint Head]

2. This is the 'Democratic' Underground.

It took George Bush and the rest of the Re-Pubic-Rat criminals 8 years to destroy this country and basically all real freedom.
Repairing the nation and prosecuting these criminals will not be something that can be done overnight. But if the People have their way it Will Be Done.
:dem:

Democrats forever!

[Lost in CT]

3. The fist 700 billion went to um.... expenses...nt

[The Brethren]

4. One of our problems is that our

government is essentially acting as a bank itself -- monies going out for bailouts, government "temporarily" taking over banks who were about to collapse, trying to ensure foreclosures, investments, etc. Whether everything is well intended or not, our government was not set up to be a bank, but to deal with monies as revenues to sustain it's functionality, including our military, and to generally "govern" our country.

This does not mean play banker. But that is what it's come to. So I just pray at this point that someone in government knows how to "balance a checkbook".


Stimulus Plan (American Recovery and Reinvestment Act) full text: Orig. House version -- http://appropriations.house.gov/pdf/RecoveryBill01-15-09.pdf Senate version -- http://appropriations.senate.gov/News/2009_02_02_The_American_Recovery_and_Reinvestment_Act_of_2009.pdf Spreadsheet of Senate compromise -- http://appropriations.senate.gov/News/2009_02_08_UPDATED_Appropriations_Provisions_of_American_Recovery_and_Reinvestment_Act.pdf?CFID=4043629&CFTOKEN=40573040 Text of Senate compromise version of fiscal stimulus legislation -- http://readthestimulus.org/amdth1.pdf

[4lbs]

5. That doesn't make sense. Let a bank with,say, $20 billion in FDIC insured deposits fail

because you don't want to loan them, say, $5 billion to cover their toxic assets.

Then when they fail, and don't have enough money on hand (Federal Reserve rules allow banks to have only a few percent of the deposits in cash available), the FDIC will be on the hook for $18 billion forever gone, instead of $5 billion that will be paid back in several years.

It's either loan them hundreds of billions to keep them afloat, or let the FDIC come up 10 to 20 times the amount to cover the insured assets.

Yes, at the time deposits were insured for $100,000 or $250,000. Nevertheless, the FDIC usually covers the entire amount of the deposit.

That's what happened when they bailed out the S&Ls back then. Even though there were lots of accounts with more than $100K in them, and they were insured only to $100K, the federal government decided to cover the entire amount on nearly all of them.

As a real world example, Bank of America has deposits of more than $800 billion ($775 billion before the merger with Merrill Lynch). How much money did they get from TARP? Less than $60 billion.

So, loan them <$60 billion via TARP, or allow it to fail and have the FDIC be on the hook for up to $800 billion in deposits.

Your choice.

Further reading:

http://www.marketoracle.co.uk/Article4335.html

<snip>
The 1.22% Reserve Ratio means that for every dollar in your bank account, the FDIC has 1.22 cents “in reserve” ready to cover your potential losses. This has proved to be an ample amount during the period of stability we've recently had, but it doesn't seem particularly significant, considering the recent headlines about banking losses (Spring of 2008).

Consider, for a moment, the collapse of Bear Stearns. In order to assume that bank, JP Morgan asked for, and received, a special waiver from the Federal Reserve to keep $400 billion of suspect of Bear Stearn's assets off the books of JPM (page 4 of the linked document). While JPM may have been padding the books a little bit here, due to the uncertainty of how bad the wreckage might turn out to be, $400 billion dwarfs the $52 billion reserves of the FDIC.

If one medium-large bank collapse could wipe out the FDIC by a factor of nearly 8, what do you suppose would happen if there were multiple, simultaneous bank failures? At this point, my guess would be that Congress would be sorely tempted to borrow additional funds to remedy the situation, but I worry that hardship and losses might result while the laws were amended and sufficient funding avenues identified. So how many bank failures could the FDIC endure? The data suggests slightly fewer than one big one.

<snip>

This is also where the phrase "they are too big to let fail" came from. They knew that the FDIC didn't have enough money to cover even one medium to large bank failure.

[On the Road]

6. Yes, We *Were* Supposed to be Buying Bad Assets with the First

trach of the TARP funds. The change in plans was due to the British, who didn't feel they had enough money to buy assets and simply decided to inject capital and buy part of the banks themselves. Paulsen changed his mind and decided to do the same and buy preferred stock. I'm glad he did, because there's a very chance the government will get all the original TARP money back.

I don't know why there's been a change in plans. Probably because unloading some of the bad assets are the only way the banks will regain solvency in the near term.

That might be the case. The quandary is that paying market (ie desperation) prices may leave banks in worse shape. Paying too much leaves the taxpayers on the hook.

That's why I would prefer some form of nationalization or continued buying of equity -- taxpayers benefit as the banks recover. Buying bad mortgages is IMO a sign that it's the only way forward, and an indication that things are worse than they might appear.

[Fire_Medic_Dave]

7. We was.

[QueenOfCalifornia]

8. "Wasn't we?"

Were did you learn that fancy english? Let me guess..... At the PIZZA PARLOR?