Just on CNBC: The bailout will not address the #1 problem!

[AndyA]

On CNBC, they just said that the bailout proposals don't address the #1 issue of the financial crisis. Banks are not loaning money, which has effectively stopped the economy.

There is NOTHING in the bailout plan that requires banks to start loaning money again, so we could conceivably spend $700B and accomplish NOTHING! The banks could just decide to sit on that money. This is the first time I've heard this mentioned, and it seems a rather obvious hole in the plan. There must be something in there that requires any bank that receives money under the plan to start loaning money again.

This sure does seem to be a core fault that should be addressed by Congress!

[Virginia Dare]

1. Excellent point, and that is my biggest fear as well...

that we hand over the money and in the end the taxpayer gets nothing in return.

[malaise]

2. The only thing the bailout achieves is

COngress handing over the power of the purse. They are fucking mad to agree to this, but Nancy et al have no guts.

[shadowknows69]

3. That was their whole reasoning, and threat, for needing this

Someone has to call them on this BS.

[The Traveler]

4. Hmmmm .... one wonders if a more practical approach

would be for government backed banks to lend under strict regulation to businesses and individuals while the credit markets sort out their issues. The tax payer is more likely to get paid back that way, the wheels of commerce continue to turn, the effects of the free market will make their allegedly historical correction, and bad CEOs don't get fat on tax payer dollars. Oh, and it would probably tie up less in the way of taxpayer bucks.

Just a thought.

:shrug:

[Inuca]

5. They cannot REQUIRE anything like that

the idea, at least the way I understand it, is that with the "toxicity" eliminated or at least reduced, the system will go back to functioning more or less normally. There is of course no guarantee, but still, there is no reason for manks not lend, that's one of their main reasons to exist after all, as long as they have a reasonable expectation of getting their money back with interest.

[Mme. Defarge]

6. Isn't loaning money

their primary source of income? Wouldn't this be like saying that we'll bail out the auto industry, but they might decide to not sell any cars?

[HamdenRice]

7. Exactly. There's quite a lot of economic nonsense floating around these days.

Banks never, ever park their money in cash. To them, not earning interest is exactly the same as losing money and is called "opportunity cost."

The main concern is that they could park more than we like in securities, especially t-bills, than in loans.

But really, the plan is not necessarily to get bank lending to businesses and consumers going right now.

The terror comes from the fact that banks can't lend each other money right now, because there is no liquid collateral (which used to be mortgage backed securities). If this continues, then basically we have financial armegeddon, with runs on banks, money market accounts disappearing, and no one being able to cash checks, or withdraw money from their atms.

So first the plan has to get interbank lending started again, and business and consumer banking hopefully will follow.

So it's not guaranteed that business and consumer bank lending will immediately follow (but as with your car analogy, ultimately it's inevitable).

But without interbank lending, business and consumer lending is absolutely impossible, which means a guaranteed great depression.

[Bandit]

8. Most people, if they just got their credit card debt paid off by someone else

Will start charging on it again immediately. They know that if they get beyond their limit they will just get bailed out once more..

[magellan]

9. Who thought it would? We've handed billions over already to no effect

$700 billion more isn't going to help. It's a drop in the bucket to the ocean of bad debt that's floating around out there.

AMERICA IS INSOLVENT.

[Marie26]

10. Yet I still get the Capital One offers in the mail

I'm pre-approved for a $5000.00 credit card. Banks are still open & signing mortgages. People are still getting home equity loans. Yet apparantly the banks aren't extending credit anymore. What's up with that?

[AndyA]

11. I get weekly offers from Juniper/Barclays, so they must also have some

credit available. I read a lot of bad things about them on the internets, though, so I just destroy and toss out.

I still see new cars driving around with temporary tags, too, so credit is obviously still available. You just can't tell who's telling the truth these days... :shrug: