DavidScubadiver said:No, Morty, it you are missing the point. Goldman is one of the BEST of the BEST. They are not a crappy bank. I think you miss the basic point of all this. CLEARLY, if Goldman, et. al, needs a government bailout, they are a crappy company that couldn't the handle downside risk to their investment. And should be allowed to fail.

The thing is I don't know if we'll ever figure out exactly how much this costs the taxpayer. Because it all depends on what price the government buys the bad debt at vs. the actual value of them. I hope we hear more about the process next week. I can't imagine that they can short change the taxpayer too badly - at least in appearance - and allow free unload at 80% or 90% face value knowing that the market doesn't want to buy those loans at anywhere near those prices.

Best case scenario as someone mentioned is in a bidding war between the holders of bad debt for government to buy. That could keep the price that the RTC 2.0 pays for those bad loans down a bit so that eventual cost to taxpayer is minimized.

Question is, how likely is the government with its usual efficiency to somewhat accurately determine the actual value of those bad loans when the holders and the market cannot determine it themselves? I'm hoping that the government really adopts a loan shark attitude towards lenders wanting to unload their toxic mortgages on the taxpayers. Nobody's buying those mortgages, so take the heavily discounted price or keep those on your books at your own risk (aka no future bailout for you after you turn down government offer).

Either way, I don't see this going well with taxpayers. This equates to writing a blank check where you don't know what you're getting and how much you're gonna be on the hook for it. Wall street may like it but main street, who's gonna be left with the bill, won't see the doom and gloom that this supposedly avoided and will only see the bottom line cost (inflation and higher taxes especially).

Though I did look, this is the best article I could find that describes a more restricted credit situation:

Less easy credit

Basically, credit card companies would give out fewer cards, or lower credit lines.

Banks that didn't give out risky loans can now be more picky, on their terms, like requiring 20% down and evidence of the ability to pay.

It rewards the ones who were less risky and though it doesn't say it, I assume those others will have already failed or just have no more access to the credit market. What I don't see is financial armageddon, just a lot less "easy money".

Can somebody point me to a good article describing the massive potential fallout of just letting these banks fail?

DavidScubadiver said:No, Morty, it you are missing the point. Goldman is one of the BEST of the BEST. They are not a crappy bank. Had they failed, which was always possible if only because people thought they might and were afraid to invest (I bought their stock this week because I know in my heart of hears they are a sound company),

Well look at that.. he bought the company. Talking his book, just the same as his constant pumping of apple. Looks to me like Dave is no different than the crooks. His own self interest is what drives his decisions. I love how he "knows in his heart" this is a good company. lol Still ignoring those billions of level 3 assets, eh?

it would have shaken the market to its core. There would have been financial crisis of immense proportions, similar to if AIG had failed. You would be unable to get loans, your company would be unable to get loans, car dealerships would fail, kids would be unable to afford tuition because student loan markets would collapse. The loss to the financial system has, for now, been entirely recovered.

And we get the "but the world would end if they went bankrupt" comment. How predictable.

There may be a silver lining. For all of those who lived within their means, socked away cash despite over-spenders needs driving interest rates down, etc, there may be an opportunity to pick over the massive pile of assets and leave the crap.

Then again, once the government owns all the MBS and assorted problem assets, it will probably take 4 or 5 minutes to get the big lending engines going for the previously over leveraged and under hedged to be able to borrow to buy the assets back at a steep discount.

Ya, Obama will give a great speech to make this all go away... Maybe in addition to the execs giving back their million dollar salaries, he can give back the bags of money he got in campaign support from them too...

FatFreddie said:Treasury Secretary Stammerin' Hank Greenburg just said, "Your future and your children's future depends upon our ability to make the financial system sound."

Translation: YOU are going to pay for all our worthless toxic paper that cannot be sold to anyone else because that market is dead. UFB in your face racketeering. Now they are going to try to herd all our moron congresspeople into a stampede to hand over another trillion dollars of our money before they leave office.

CALL OR WRITE YOUR SENATORS AND REPRESENTATIVE!

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I have written repeatedly although I think my letters have fallen on deaf ears, I continue to encourage my friends and family to write in as well.

What happens to those financial firms after the federal bailout? Will they (at least those still standing) be allowed to go back to their old ways, only to be bailed out a few decades in the future?

DavidScubadiver said:nycll said:Dealguy123 said:The last one dealt with assets of banks that went bankrupt. This RTC 2.0 looks to be dealing with banks THAT AREN'T EVEN BANKRUPT?!That's what I don't understand. The government is supposed to establish a set of rules and ensure everyone play by the rules honestly, and ensure orderly unwinds of failed companies. This RTC2.0 seems to be a result of very hasty decision making processes.Yes, it was hasty. But the haste was necessary. People have no idea what it would mean for a company like Goldman to go under. Business was going to come to a screaming halt. They took emergency measures and sure, some people got hurt and got hurt real bad as a result. These were the people taking advantage of the fact that they could drive prices down by selling declining stocks short and by spreading rumors about the financial health of these companies, further exasperating the problem.

Was it a perfect solution? No. But did it keep Goldman's stock from disappearing? Seems to have done the trick. These Goldman guys are great people. They make a lot of money but that is no reason to hate. They fund great businesses. People need them to raise capital. This was all needed.

Edited: They should never have lifted the uptick rule. Put it back so this does not happen again. And again.

I think this makes you sound like a sucker. If you believe the government has any power other than prolonging the agony of a floundering market, you are delusional. What they are currently doing is centrally planned socialist redistribution from the many to the few via the stealth taxation known as inflation. If you can't see this, then I can't understand why you think you understand anything about it.

My own opinion is that we are being set up for a Japanese style melt-down so that the Chinese can more easily wrest control of the world's resources from the US. Sadly, I think the depression has begun and so will everyone else when their retirement savings won't pay their property taxes.

If you think the US economy is "Too Big To Fail", you have another think coming. Although Woodrow Wilson stuck the knife in the heart of capitalism, GWB gave it a twist and ripped it out. Soon there will be no blood left to pump. Mark my words, the empire collapsed this week.

DavidScubadiver said:That is a very simplistic view. Nobody who is financially aware believes Goldman was a crappy company. Nobody has ever even suggested they could not handle the downside of their investments. Their investments have been doing fine.

David I'm surprised to see you get so much heat on this topic yet know the most of people posting here. I agree that GS was/is the Plantium/diamond/black/cadallic standard as good as far as investment banking goes.

What are your thoughts on the repealing of the Glass-Stegall Act and GLBA in '99, my gut says this is perhaps the core of our compounded problems. I flinched when this happened, it was at the time tossed into the dot-com madness I couldn't make sense of.

It seems like every generation thinks that outsmart the past and human inclinations, but gets caught up in the same root of the problems. Remember the dot-com nonsense that drove people to turn soccer-mom to day trader to buy "whatever.com" that had an IPO before a business plan? People in 99-00 thought oh well, we'll create new matrices to rationalize the 1000+ P/E and traditional fundamentals don't apply in this day in age.