flynn23 wrote:

Decius wrote:
If the Democrats win, all of that money, unfortunately, will have to be spent on bad debt which won't be worth anything in the end. Obama will not be able to make progress on any of his social programs because the national debt and plummeting US dollar will be in an untenable situation. If the Republicans win, however, it will turn out that only 100 billion was needed. Things weren't so bad after all...

Unfortunately, I don't think it matters. This isn't about who gets elected next, because that's irrelevant. It's about which lobby has enough presence to get what they want. Right now, it's the banking and financial system lobby. The price is $700B. That includes cleaning up all the bad debt, making sure my firm survives and has liquidity, and oh, I get to keep my bonus as well. This deal stinks. Period.

Not that I disagree with your conclusion, but...

The banks don't need the government to sell these assets at market value, but they don't want to do that, because if they do, they have to mark all of their other assets to that market price, which will screw their balance sheets (reasonably or not). Hence, the liquidity problem - no one wants to sell anything. In some respect the point of the bailout is to buy the assets above market rates, which keeps the bank's balance sheets from deflating.

Now, I'm quite sure we end up eating the difference. It boils down to whether or not you think the market price is actually reasonable. I'd say if that was in dispute the government's assistance wouldn't be required either.

Regardless of how you slice it, the tax payer is being asked to eat all of the financial losses incurred from the go-go days of the housing boom, while all of the people who generated those losses go home with 6 figure bonuses.

RE: News Analysis - For the Nominees, New Roles and New Risks - News Analysis - NYTimes.com