Wasn't the BAILOUT the ultimate in Trickle Down Economics?

[redstate_democrat]

I heard a lot about the evils of trickle down economics this year, but then as soon as the bailout was proposed, Democrats fell over themselves to support it. We were told this bailout would solve the crisis. We were told that if Wall Street didn't get its cash, the system would implode. It got its cash, but what has happened since? Not a damn thing. This was the ultimate trickle down. Wall Street and D.C. simultaneously pissed on our heads.

[Trajan]

1. I think you are confused as to what is trickling down ....

It is also known as 'top down' economics, where those at the top of the food chain amass the greatest amount of wealth, and flow money downward, in other words, to 'trickle down' money to the lower classes ...

The bailout was the opposite, with money taken from ALL taxpayers, in other words, mostly the poor and middle classes, and flowing it UPWARD to help banks and the investment class buttress their failed investments ....

The 'pissing on our heads' thing might seem colorful to you, but it has nothing to do with the concept of 'trickle down economics' ...

[redstate_democrat]

2. I understand what trickle down economics is.

I also understand that the money flowed to the top from the bottom. Isn't that how it always works anyway? My point is, the rationale for giving these banks this money is based on the theory that if you give to the top, then the benefits will trickle down. This is what this was right? We had to give the money to the top, so that those on the bottom wouldn't suffer. But the benefits don't seem to be reaching main street yet. They don't even want to do anything about people losing their homes. Just give it to the banks or else people will starve and die they say.

[DrToast]

6. Not quite...

I also understand that the money flowed to the top from the bottom. Isn't that how it always works anyway? My point is, the rationale for giving these banks this money is based on the theory that if you give to the top, then the benefits will trickle down. This is what this was right?

The purpose of bailing out the banks was to keep them solvent and to retain a functioning banking system. The goal was to keep the patient alive.

[lapfog_1]

18. Actually, a bit more specific than that.

The goal was to buy the troubled assets from the banks and other institutions that ended up with these bad mortgage backed securities in their investment portfolios. And it was sold that doing so at a discount would allow these institutions to regain the trust of their investors, regain their stock price, and, ultimately, free up the new cash for banks to lend to retail banks... and thus ease the credit crisis. The story goes that the Treasury, now holding all of these mortgages, would be able to either restructure them into something the home owner could afford OR hold on to the property long enough for the housing price to rise again and then sell the mortgage at that point, getting the taxpayers money back.

Only it never worked that way.

There was another rule that was removed in the meantime that allowed banks to buy other failing banks (or really, any troubled corporation) and use the loss of the purchase against their own "profits", thus saving the banks an estimated $180 B in tax revenue over the next year or so. So when the Treasury money started landing on those banks, instead of using it for the original purpose of buying up mortgages or even MBS, they used it to buy out their even more troubled competition, knowing that as near monopolies, they will have even bigger profits in the future (and no tax liability) and that will more than offset the losses now (which really aren't bank losses anyway, as most of those assets were sold to investors and the banks only serviced the investment). Which has done nothing for the credit crisis, hence the lack of sales of any big ticket items (like cars) because there isn't anyone to finance said purchase. Without the demand, companies are laying off more workers, thus ensuring a "lather, rinse, repeat" cycle and risking that a recession will indeed turn into a depression.

If you want to see an example of what just happened, look no further than "It's a Wonderful Life". Potter was out buying up the other "bank" in town (the good 'ole Savings and Loan) so he could gain a monopoly over "Pottersville" and all the evil things that were shown to Jimmy Stewart by Clarence the Angel would come to pass.

I think a firing squad would be a good start on a solution to this corrupt greed. Or at least very long jail terms. We don't need to accuse them of any illegality, we simply use the rules put in place by the Bushes to arrest these bastards and put them in Gitmo for 5 years. That will prove to be a deterrent to the "Potters" on Wall Street.

[No Elephants]

15. No, money does not always flow from top to bottom.

[joshcryer]

3. Mind you a lot of people were fiscally irresponsible by getting loans they couldn't afford.

The banks gave them out, also irresponsibly, but the people who took out all of these mortgages should've sought the long term implications rather than hoping for the best.

[redstate_democrat]

4. You know what, I'm gonna defend the poor and middle class workers here.

A lot of the people who got these shady loans were misled into them. Furthermore, if we're talking about fiscally irresponsible actions, the banks are to blame for that. These poor and middle income folks just wanted a place to LIVE. They weren't trying to make a sleazy buck on the backs of poor and middle class folks. Now when the shit has hit the fan, they want these SAME poor and middle class folks to bail them out. Where's the bailout for THEM? All they want is to stay in their homes. These banks just want to fatten their profit margins. This is ass backwards.

[Trajan]

5. That is Rush's argument ... and I am not buying it ....

If the poor werent so poor, they would have the money to go to college and learn about deceptive loan practices .... But hey: They are POOR ! ....

I think the poor and lower classes who received those loans should have been more careful, yes, but then again: they should have been given raises when profits shot through the roof, and they should have been offered more help to gain a decent education, among other things a decent society should provide to it's weakest members ....

And one more thing: They should have the respect of Liberals for at least trying to make it in this crazy world, knowing how difficult it is 'out there' ..... It's hard enough to survive this harsh environment without having Liberals taking potshots at you too ....

[DrToast]

8. The problem is that it's not just poor people

In fact, many of the bubble zones were in wealthy areas.

[joshcryer]

12. That's the "free market" argument, and I don't agree with it on a nuanced level.

Regulations would not have allowed it to happen. But that's why the Democrats don't see it necessarily as a "trickle down" dynamic. The mess is a double edged sword.

[No Elephants]

17. Lenders have ALWAYS been the ones to make the decision whether or not to lend and how much

to lend. Why? Because they stood to lose unless the borrower repaid. Therefore, borrowers have always known that they would be refused the loan unless the expert in the transaction--the lender--determined the borrower had the ability to repay.

De-regulation changed all that, letting lenders rake in just as much money if the borrower defaulted as if the borrower repaid. At the same time, changes in laws eliminated or reduced the disclosures that the lender had to make.

While lenders were very well aware of these changes--they had lobbied for them--borrowers were not. They were assuming that the old rules applied, that the very fact that they got a loan indicated an expert opinion that the borrower could repay that loan in accordance with its terms.

It is convenient for Republicans to blame the borrowers, instead of the lenders whom their laws favored, but not particularly in line with the facts. In other words, instead of an inconvenient truth, Pubs are peddling a convenient misrepresentation.

[FrenchieCat]

7. Obama was elected 1 1/2 week ago......

The trickle down economics you speak of has been going on since 1980. At the time, it was called Voodoo Economics. I do not believe that the result of 28 years of Trickle down economics is going to be solved in 1 month....even with 750,000,000 Billion dollars; so no, the bailout ain't gonna be solving this crisis over the next few weeks. To even believe that is not logical. I don't believe anyone said that this injection of money into the financial institutions was going to "solve" what is to come....only that it could make the depression coming be a recession instead.

If you are upset about the state of things as they are, you can blame all of the fiscal conservatives who have operated on this "trickle Down" theory for all of these years....and all of the voters who have bought into it.

To Blame the Democrats in congress who voted for the bail out last month at this point, is really being as confused as those who voted for trickle down theory for the past 28 years.

[redstate_democrat]

9. I didn't expect this bailout to solve anything. I was right.

But the politicians in Washington, the pundits on T.V., and the bankers all said we HAD to do this or else the economy would collapse, to stop the bleeding.

I'm sorry, but this hasn't stopped anything. October saw the highest unemployment numbers in years. The retail numbers were abysmal. People are still being foreclosed on. I just don't see how giving money to banks, without helping the homeowners, is going to solve anything. I thought the problem was in the housing sector? Paulson doesn't wanna give them a penny. He wants to buy stock in banks and prop them up. I fail to see how that will actually help homeowners.

There is gonna be a depression regardless of this bailout. This bailout didn't stop jack. The only difference will be is that fiscal hawks will now claim there isn't enough money to actually help poor folks because of the bailout price tag.

[FrenchieCat]

11. Well, the damage has been done.....certainly.

The Bail out money has not been injected....which is a big part of the problem.

Do you know the terms for this bail out money? Do you know what the restrictions are, etc...?

[redstate_democrat]

13. Yes I do know what the restrictions are.

Do you know that Obama called for help for the homeowners and Paulson is resistant to that? Do you know that Paulson is now saying the money should be used for credit cards, car loans, etc? Paulson is single-handedly trying to expand the scope of the types of debts this money could be used for. He is brushing off the FDIC chair and her suggestion for helping homeowners. He is buying equity in banks and that's it. This doesn't even include the money the NY Fed is loaning out to these banks without any transparency. But when it comes to the homeowners, not a dime, not a word. Some of the banks are taking it upon themselves to renegotiate mortgage loans. I think Citibank is doing that, I may be wrong. But the government is most certainly not forcing them to do so.

[FrenchieCat]

14. Well we all know that Obama is not in charge yet.....

and we know that Bush and just about everyone who works for him is a weasel of sorts. I'm just waiting till January 20th.....cause we don't have many other options.

[lapfog_1]

20. The bailout, as explained to congress and the people,

never even happened. Something else was done with that money.

And we should be pissed off about it. The markets sure are.

We should be taking Paulsen's head on a pike down to Wall Street, everyone carrying a pitchfork and a torch.

[99th_Monkey]

10. Looks more like Gush Up Economics from where I sit. ~nt~

[No Elephants]

16. Or, as I have dubbed it "Trickle down, tsunami up."

[johnaries]

19. No. And no one said it would "solve the crisis".

Obviously you don't understand the situation or the purpose of the "bailout". But you are not alone, because it never was properly explained except for a very few media outlets. I got my initial explanation of the crisis from NPR, and learned more by our old friend Google.

The real crisis was not in the mortagages. That was only one dominoe. The problem was in "commercial paper" (basically short-term business loans)which businesses - especially small businesses - need in order to conduct daily business.

No one ever thought the "bail-out" would solve the crisis. It was merely a band-aid to keep businesses working long enough to come up with a long-term solution.

Seriously, use "the Google" and do a little more research.