I told my son this weekend to remember this time. Your US Government just stuck you with a $10,000 bill (plus interest) for the speculative excesses on Wall Street and ineptitude of the elected representatives. After saying "wow that really sucks", he said "at least if they paid for my college it would have been something productive". Then he said "our leaders should have remembered the parting words of George Washington and not be dependent on other nations". If our politicians were only so wise.

Perhaps as young people begin to understand this, they will also begin to vote.

It's incredibly sad to say this, but I would love to see a freshly-knowledgable Gen-Y'er confront her Boomer parents over this issue, especially as those aging Boomer parents are cooing over their infant grandson who will be footing this bill.

"Mom and Dad? You SUCK, you self-indulgent little children."

Anything congress does will only make things worse in the long term. Government undertakings always backfire with catastrophic results.

In the short term, it may (or may not) have the consequences identified by Mr. Practical; in the long term, this stuff gets paid back to the treasury, as did the bail out of Chrysler Corp. many years ago.

However, if the so called "Bail Out" doesn't happen, you may be looking at 25-30% unemployment during the coming 2 years; for certain their will be massive bank failures which will cost the FDIC (read Federal Government) more than $700 billion - so in the end, the money will get spent either way.

We already have had a massive devaluation of the $ vs. the Euro during the past 5 years. In the past 60 days or so, the $ is up by ~10% - I track it every day since I am an American expat who retired in Spain. When the bail out is finally signed, I look for the $ to stay fairly stable - since this credit crisis is a world wide phenomenon.

I am hoping someone can explain the FEDs moves today. What does it mean that they can pay on the deposits? I mean, I know what it "means", but what will it do?

When a boat springs a leak, water comes in at a certain rate. As the water rises above the level of the leak, the rate of water coming in slows as the pressure of the water inside increases to match the pressure of the outside water.

One of the consequences of a large bailout (in a physical boat) is to increase the rate at which the boat is taking on water. That is, if you don't fix the leak. I don't see anything in the housing bill that fixes the leak (house prices too high).

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In the following month: I Can't get Started; We've only just Begun; All in the Game; and Fun, fun, fun till her Daddy took the T-bird away;

In month three you will be singing: Break it to me Gently; A Fool such as I; Here we go again; My Foolish Heart; and Pick Me up on your way Down.

In a future installment you will be dancing to: Is that all there is;
Running Scared; Born to Lose; I got Plenty of Nothing; and I'm Busted.

Next it will be: Crying Time; It only Hurts for a little While; Can anyone Explain; Why'd You do Me that Way; and Who's Sorry Now.

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Each of these CDOs has been digitally re-mastered to sound even better than the original issues. These will indeed become family keepsakes and heirlooms to be handed down for many generations. Remember all of these items were, until recently, collected and traded by some of the most prestigious members of the financial community.

But wait – that's not all!! If you act now, you'll also receive $85 billion worth of AIG obligations. As our token of appreciation for giving you the business, there will be an added bonus item - not a duck, not a gecko, not a cavemen – but an AIG goose. Please be assured that your goose will be cooked before being sealed in red tape and delivered to your door.

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Fine Print (2 pt type and read very quickly by someone with a foreign accent)

Some restrictions apply. Offer not valid in state of sanity. Financing to be provided by China or third-party named Ponzi or Guido. Handling charges may seem exorbitant but you can't imagine all the hands that are involved - if you want it bad, you got it bad. Interest and principal to be repaid by your descendents with virtually worthless dollars (if postage stamps exceed $700 billion for 1st class, remittance may be made via bank transfer but, unless you are cryogenically frozen and they forget about you for a long time, it won't be a concern to you). Domestic customers will receive their CDOs via the Ben Dover Delivery Service. If you are dissatisfied for any reason, just contact your gov't representative and they will gladly tell you what you can do with it.

I'm imagining the result will be a world like "Logan's Run", where nobody over the age of 30 is allowed to live.

This is exactly whey they don't let anyone under 18 buy firearms: because they would know what to use them for.

Keeping people in houses that are too big to heat.
That's the plan. Whatever the government did for the last 70 years, has always sent more money to oil companies. The banks are just a conduit for oil money.
We import 600-700 billion dollars of oil every year. We not only should not be keeping people in their houses, we should be kicking them out and tearing them down to build smaller ones and return the land to manual food gardening.

We don't need hope, we need manual labor to build a new, smaller world without oil or Disturbia.

Here's a little article refuting your assertions:

The Chrysler Bail-Out Bust
http://www.heritage.org/Research/Regulation/bg276.cfm

The government loaned Chrysler 1.5 billion dollars with all kinds of strings attached. Personally, even then I didn't agree with it but this boondoggle bears no resemblance to that transaction.

First, Chrysler actually made something of value. What do these banksters manufacture beside more debt and bonuses for themselves?

Next, I know there has been inflation but, come on, you want to compare 700 billion to 1.5 billion?

Next, this isn't borrowing on OUR future...its selling the next generation's future down the river!

Finally, the solution to too much borrowing isn't more borrowing.

To use a common cliche, when you are in a hole you need to stop digging.

Enough is enough Congress.
It is time for a change. While I hate to say it, I think we should pay for this now, over the next 10 years. Assess each taxpayer a percentage on income to pay for this "package."
It will hurt, (and I am not part of the problem -I own my own home outright) but we need to change the way of thinking, for our children's sake. And while I am at it, Congress should take a hit as well - a 25% reduction in pay over the next 10 years.

Will,
I don't think a pay reduction will do the trick. If we keep electing people who are not equipped to handle the task at hand, we will continue to get the same results. People who get elected to Congress are good at only one thing - getting elected.

I'm a millenial...third yr one at that. No gen y'rs...

I've confronted my parents and they cop out. Ignorance is bliss...all it does is cause family acrimony. I've tried to save their finances and succeeded for the most part. She's already seen savings of 14% due to my warnings...good luck everyone. Dont vote...march. Just get some people together and walk somewhere as a group...nothing more or less. Civil disobedience...

Another excellent articles, as this whole crisis should never have been allowed to happen.

I think the only thing that can prevent this is more financial education of the county. The "Berries" and Wall Street guys would not be allowed to get away with this if people understood it.

What some of these firms did was outright crazy.

At least Minyanville is a giant step in the right direction.

Patrick: Millenial it is. I'm an X. Our generations, and the next, will be required to come together to dig out of this mess. Happy to get started by applying the correct language if nothing else.

One other thing, though. Yes, by all means go out and march. But you MUST vote - otherwise, we are absolutely guaranteed to get more of the same. You have to do both.

Robert: Demand for houses is being inhibited because even the best qualified buyers can't get loans. The banks can't loan because they don't know if they have any money because of the bad loans on their balance sheets that nobody knows how to value.

With the rescue package, the Fed buys both good and bad loans on the bank books. The banks can now open up their balance sheets so they know how much they can loan out to well qualified buyers. Buyers get loans, buy property. Demand goes up and prices will begin to stabilize as a consequence of increased demand. This repairs the hole in the bottom of the boat.

Many of the loans being purchased by the fed will be paid back; the fed is buying the loans on the cheap and may actually make money when the loans are paid off in the next 10-15 years.

It is a very good plan and deserves our support.

Not on income: on purchases. Taxing income is a lie. When income is taxed, people simply overexert themselves to make the amount of money they want to spend. The only honest tax is at the point of purchase, where the purchaser can say "no" to too much tax or too much secksual stimulation (advertising).
The whole reason we are in the globalized mess we are is because of too much spending on things that are not needed for people to live well.
We buy stuff, then we buy a government to protect our stuff, then we borrow all the money from banks to put our stuff in storage, then the government wants to protect its stuff and taxes us to buy bombs and bonds to protect the banks who loaned them the money.
The government can't give money to the banks. It doesn't have it. The government is 9 trillion dollars in debt (officially), and that debt is already owed to lenders. In order to PROMISE to tax US to pay THEM, they have to BORROW the money FROM banks to SAY they are paying for mortgages which were just a PROMISE by US to pay the BANKS.
This circle jerk has GOT to stop somewhere. Turn off the music and see who has a chair. Stay home, buy less, buy local, build things yourself. We don't need Them.

If God meant for us to vote, He would have given us candidates.

We are supposed to vote for what we want, not the lesser of two evils. That's how they get you to fall in line.

It's too big to fix, and too big to take it apart.

The banks aren't making loans because nobody needs the houses that are for sale. People who are qualified are looking at $500,000 price tags for sheetrock shantytowns and saying, "How am I going to afford to heat that and pay taxes on it when the government is now handing me another $10,000 tax bill?"
People are stupid, but not THAT stupid.
This isn't about the loans, or the banks: it's about resources and useful activities by real people trying to live and work. Being qualified for the scheme of debt slavery called "mortgage" doesn't automatically mean you have to prostrate yourself and your children's children.
We are at Peak Oil production. All of the past economic activity growth has been based upon projected growth in perpetuity. Humans are collectively realizing that this is impossible and the banks are trying to force an unnatural condition upon us with artificially low interest rates.
We are not interested.

You don't have to vote Democrat or Republican. Further, you can run for office yourself, or get out and find candidates who will bring about real change.

My point is that you have to work the system through the system as well as being visibly out on the street (and elsewhere) challenging that system.

Might sound naive but if we don't use that power it is virtually certain to be taken away.

Right. Even if bailouts in the past eventually were "paid back", those dollars were worth much less. so there was substantial economic loss. this will be no different. secondly, if Asia is willing to lend us this extra money, currencies will remain roughly the same since they will have to print their own currency. but if they are unwilling to lend Asian currencies will rise relative to the dollar.

Dan:

So don't buy one of those homes - it's ok if you don't want to. But the banks must have a way of getting back in business loaning money to qualified buyers. That's what the plan does. Otherwise we are facing an economic meltdown with 25% or more unemployment and a massive dislocation of everyone.

Are you suggesting that all those big homes be torn down to provide kindling for heating one room cottages? How about some nuclear energy to supply electricity so we can keep those nice homes (that are the envy of the world)? Maybe do some offshore drilling to stabilize fuel supply while working on alternate energy sources to supply cars and trucks?

If you don't like the plan, maybe you should provide an alternative plan that will not create an economic meltdown.

Your assumption is that we absolutely have to prevent an economic meltdown. The economy is a side effect, not an end in itself, nor a means to an end (except a self destructive one).
People need to do useful things. If that means to be living without threats or fear of collapse, then perhaps they shouldn't have built their society upon unstable resources coming from unstable countries.
Nuclear power to heat the homes? Are you freakin' SERIOUS?
And which planet are you going to put the radioactive waste on? If you've got to hollow out a mountain, it's a good bet that you're doing the wrong thing.

700 billion dollars. That's 100,000 Alaskas.
I suggest we LET the economy melt, stop burning oil so people drive to work at jobs to pay for oil to drive to work that they probably don't want to do and which is probably working to INCREASE our dependence upon imported oil.
Ban all advertising outside 200 miles of the point of production.
Put all government costs (fees, social security, income taxes, military budgets, etc..EVERYTHING) into a sales tax. (See fairtax.org and double it)
Melt the economy on purpose and see what shakes out.

You probably think that we would be overrun by Communists or Terrorists, or God HELP US!!; Canadians! We have created our own threats and now they are all coming home to roost in the form of a Roman Collapse, rotting from the inside of our debt-based, imaginary economic Empire.

I don't have a problem with nuclear energy.... But I don't see where lending money for people to buy homes is going to stop the 25% unemployment you talk about. As for "nice homes that are the envy of the world" - Aaron, get real ! Know that compared to that nice Mcmansion - which is what you refer to isn't it ? - a typical middle-class home anywhere in the 4 foreign countries that I have lived in is more interesting architecturally, uses less energy, was not built around and for automobile storage, has enough space around it that you can't see into the neighbor's toilet, has solid walls, tile roofs that last indefinitely... Even the lower category house typically has a granite countertops and built-in closets you have never seen the likes of. They build 'em slow, because credit isn't easy to get, and they build 'em as if they actually planned to live in them. A foreigner sees the TV pictures of US houses floating away in flooded rivers or turned into a pile of 1 1/2 by 3's and wonders what on earth it was built of. They envy your home like they envy Hummers. Dill in South America.

Short-term this is the worst thing that can happen, long-term, its probably the best thing for is...either way it sucks.

People will continue to short sell one way or another.

If you're gonna short sell, learn how to do it this way:

http://beta.equedia.com/blog/view.php/Synthetic-Short-Stock-Explained

Generation Xer here:

My boomer parents and in-laws refuse to understand the consequences of their actions. My in-laws, especially, are almost sterotypical in their level of greed and followed each modern bubble in hopes of being wealthy, while ignoring what those bubbles meant to the next generation.

We've chosen to not confront them in general. Family peace is more important than the blame game. However, we have also withdrawn support. For instance, they choose to move 1/2 continent away. (Thank you, thank you, thank you!) When it became clear our visits on our nickel would be taken for granted, we made conscience choice to stop visiting.

Currently, my husband barely speaks to them (maybe once a month). I have hardly any contact at all. It's not the way we want it but it seems to be the only way to create healthy boundaries and live our lives.

Thanks Mr. Practical, good advice.

Kids, read this one too: "The real solution to the financial crisis: recession"

http://www.csmonitor.com/2008/0930/p09s02-coop.html

Could be as you say. Anyway we parse the numbers it doesn't look like even mortgage rates at zero are going to stimulate buying. The amount of money it will take to recapitalize the banks is way beyond....

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