Very reasoned explanation, but the banks are getting 700 billion dollars. I don't know for what they're going loan it, but I doubt it's going to go for subdivisions.

It should be loaned to wind and solar power companies, and mass transportation and railroads. Since it's unavoidable anyway, C02 mitigation is the only economic future with substantial growth potential.

The RTC sold its assets too fast. The RTC easily could have made multi-billions in profit - perhaps even a trillion. Hopefully Obama's people have more brains than Bush people. I think that's a lock.

Can we be certain that the funds will be used solely to buy 'assets'? I was under the impression that the wording of the bill allowed them to purchase 'mortgage related' instruments ... leading to the purchase of Credit Default Swaps, where there is no underlying asset.

Surely it is the explosion of CDS's that is the main contributor to the depth and breadth of the current problem? Since the total mortgages in the US under foreclosure don't come close to adding up to the dollar totals in the bailouts plus the bank writeoffs already taken.

The Hell, you say. Let's call it a giveaway, just to get the pejorative right. The financial institutions get money for nothing (chicks for free).

Not quite. This will in no way start money flowing. It is slow because of two reasons:
1. Banks don't trust each other.
2. Banks are being prudent with lending. (Like they used to be, we're just not used to it.)

So how does overpaying for junk assets change 1 or 2?

They don't.

(Also, if they were really money making opportunies, why is there $3T in hedge fund cash sitting on the sides instead of making money on this? Buffett? Gross? That argument only works on the CNN/CNBC crowd.)

It's a bail-out. Somehow we couldn't come up with funds for health insurance reform of a cure for cancer. But we can find the money for banks and investors gone bad. Resue? Yea right. I believe everything the government tells me too. Thank God Bush's proposal to defer Social Security funds to wall street didn't work.

Well Halloween is almost upon us and the search for the scariest costume starts. This year if you really want to scare folks I would suggest dress up as the past CEO of Fanny Mae, Freddy Mac or Lehman Brothers. People will recognize you right away because of the limo your riding in and the golden parachute strapped to your back. You must also barge up to every door while kicking the little people out of the way. It’s very important to remember that when you arrive at the door and the person scolds you for your abuse of the little ones, you must say “Sorry it wasn’t my fault and by the way I need at least half your candy before I leave...you owe it to me”.
BUT if you really want to have some fun at this time of the year here’s a plan. I always get weird looks when I do this. Here’s what you need...a spray bottle filled with water, a long dirty trench coat and a very crazed shaky appearance. During the busiest time of the day, go to the store. Before you go in spray your face with the water. Now go a get a bag of apples and a package of razor blades. Head up to the check up line, with water slowly dripping down your face, start rolling your eyes, throw in a few shaky jerky movements, then turn to a few folks in line and say something like...” I love Halloween, hope there’s tons of kids this year”.

Have a safe and happy halloween kids and thanks for the read.
Bryan Cox

Whether or not you call this a bailout, here are some concerns:

1. You mention that this is not leaving any of the institutions intact. That's fine. What about the individuals involved? If the assets are being bought rather than seized, then I assume those individuals are actually getting tax-funded money for them. Yes?

2. The taxpayers will not "make money" if the government turns a profit on this. Government agencies will simply have the extra revenue in their budgets. If you believe that this will somehow translate into increased benefits for the taxpayers at large--well, I'd like to hear that argument made plainly, please.

"Liquidity" is a game of myopic short-term interest. In the long run you want decisionmakers to take liquidity challenges into consideration when making the loans in the first place, and for there to be consequences when they make errors of judgment.

I fail to see how selling the bad loans to the government constitutes a serious consequence.

"Bailout" is a catchall word. A terrible description of any financial method employed, and media didn't help. I've always said a better word would be "recapitalization" at least in the case of Bear & AIG, et. Both of these loans are not even taxpayers money, but people became so paranoid that Paulson allowed Lehman to fail. Within the next 3 days the Credit Market closed, as I predicted. Now we have to pay for that mistake, by not saving Lehman and pleasing certain Lawmakers and the General Public. As far as the 700 billion "bailout" (the ugly word) only about 20% are in default. But 20% becomes a huge problem on the balance sheet. It's my judgment that once banks become stabilized, there will be sufficient income to pay principle & interest to buy back the CDO's & in addition to - once stabilized - the toxic paper will at one point receive a value. As far as the Credit Markets - I can't see the 700 billion aiding much as long as Libor keeps bank to bank windows closed. It will be a long process. If "recapitalization" would be a 3 letter word, perhaps it be used properly.

"CDS" - the fed will not buy CDS, those are spreads in insurance to cover default. THOSE will take care of themselves once an institution becomes stable "and its balance sheet strong enough to return to ratings of the original note", then spreads will fall, and when the institution is still alive after the contract period they will expire -- CDS gone - puff in thin air.

The government is likely to come very close to break even.

If the economy returns to growth mode in less tan 3 years, the government is likely to make a substantial profit.

It is unlikely this thing will end up costing the taxpayer anywhere close to 700 billion.

I can drive you to see a house that was sold by the RTC for $10,000, which was about 1/3rd what they would have gotten had they exercised even a hint of patience. Today you could not buy it for $750,000.

Managed correctly, and with the wind of a healthy economy, which always eventually follows a dip, this "bailout" will make money.

One key component is holding down future house construction. The construction trades can remodel existing willy nilly, but, while the taxpayer is saving the industry from themselves, new house construction needs to be kneecapped.

From the little I can understand of this bailout, it is not only the banks which are being bailed out.
Why should those in the rum industry, wool industry or children's wooden arrows be helped, when those of us with health issues are doing without medicine or food? Members of our Investorsplace.com are looking for answers - please tell us.

Bailout? For who? It is really a pig with lipstick, mascara, a big red bow and squealing - "oink,oink". The bill contains at least 2 billion worth of pork over 5 years and the final figure will be well over a trillion.

To the others that mentioned the RTC - it did make multi millions - for the contractors, not the government, nor the taxpayer that funded it.

This so-called bailout legislation has only a slim chance of success as it can put money into the banking system, but it cannot erase fear. Fear + layoffs + consumer sentiment + the probability oil returning to the upside = total economic stagnation, at best a solid recession.

The RTC paid contractors.

Are you stupid enough to suggest they should not have, or that they should have hired rookies? Yes, in many cases they hired professional real estate people who had been part of the problem, but they were also excellent real estate people.

The RTC lost money because Pappa Bush did not want the government to own them any longer than absolutely necessary, which led to a fire-sale environment.

Move 'em; move 'em out, rawhide! We used to sing that.

If they been patient, the RTC easily could have turned a substantial profit.