Servers buckle as Congress rejects $700bn Wall Street bailout

OK..

OK.. this was the first I'd read the bailout got rejected.

A) I'm glad these guys that fantastically mismanaged money are not going to just get bailed out with my tax money.

B) Hopefully it doesn't collapse the economy.

C) At least the site is just slow and not dead. I certainly give more props to a site that slows down under load than one that goes straight from fast to dead.

Brrrr

That's because they run ColdFusion as the scripting language.

it's nice n easy, but it sucks.

throw money at it, it will fix itself...

address the disease not the symptom...

the market is crashing itself, don't try to stop it.

best case scenario after a bailout, you get a lame version of exactly what came before and hopefully it won't crash.

best case scenario without bailout, the market eventually fixes itself and is actually healthy... but who really wants a healthy market?

Microsoft's view

Now I'm convinced that the bailout will NOT be something useful - except for the 1% who will see their $1 millon/month wages continue. The best proof is that Microsoft endorses it! :)

-t

MS thinks it's bad?

I bet they would. It' s money that's not gonna end up in their pockets. The bill was rejected, and it's bad because people -and the (mis)management types first- might understand that they may some day have to cope with their dumbness by themselves and that they need to grow up. And this very day, as a side effect,MS sales might dramatically collapse.

Joke aside, and though I don't really give a shit because it's not my money anyway, I'm glad this pile of cash was kept out of the reach of the fat pigs. But I'm sure the now homeless real victims (yeah, they've been gullible, but still victims) would know what to do with this kind of cash. Not that anyone in charge would ever think of that. Just saying.

All very well for Bill G.

Since he only pays minimal taxes, and Microsoft pays practicaly zero taxes it very easy for him to recommend a corporate welfare program for Wall Street.

He may even pay the $2000 each US tax payer is expected to contribute to the whole fiasco.

Greed gets its payback

So let me get this straight.....the plan was to use a shedload of taxpayers money to bail out a bunch of mismanaged companies? These companies lent out other peoples money to various parties purely out of the chance of making a profit. If any retail company made the same mistake (which I'm sure some do) then they'd just be forced to handle it or go bust, but these multinational financial institutions which make billions of dollars a year profit need a helping hand?

Ok, sure, bail them out but on the condition that they cannot make a penny profit until their debt has been repaid. Then if/when the economy sorts itself out, we won't have them gloating about how much profit they are making knowing that they are only still in business because we (the taxpayer) bailed them out.

As for the stock market, it's pretty much the most greed-ridden place on the planet and now they're all shitting bricks. I guess this is the downfall of a virtual economy, where actual physical assets are no longer the measure of a companies wealth or value.

$168 billion rebate checks

How'd that $168 billion fiscal stimulus package work out, the one where you all received rebate checks paid for with borrowed money? Did that work? Or the 2004 tax cuts paid with borrowed money, or the 2000 one?

I told you so.

The $700 billion bailout was just another injection designed to defer the problem. I'm glad it was rejected. You first need to get Bush and co out of office before you can fix anything.

It sucks that European banks bought some of this crap bank mortgage bonds, but we'll survive.

Now that Microsoft have spoken...

...I'm sure everyone feels much better about the bail-out plan.

Seriously, though, the lack of cash is caused by a lack of trust between banks, and *that* is caused by the fact that no-one knows how much their paper is worth. Slowly, though, as banks fall over one by one (worst first) it will become apparent who is holding the toilet tissue and who has something of real value. There's nothing fundamentally wrong with the economy, *unless* some fool decides to blow a trillion dollars bailing out their cronies.

I note that central banks pumped 620 billion into the markets yesterday alone, an appreciable fraction of the amounts being discussed in Congress, and Wall Street responded with a massive dive. Hmm, maybe cash isn't the answer. Maybe cash isn't the problem.

No, what the market needs is accurate information, valid accounts, that sort of stuff. Once it has it, confidence will return. Not because the bad debts have gone away, but because everyone can see where they are. That bad debts will stay, and hopefully ruin the fools who brought them into being, rather than the poor suckers who were conned into taking them out. Congress should legislate for the publication of proper accounts by the loan sharks on Wall Street who think they can hide their crimes behind systems of partial differential equations.

retards

If the banks don't gain confidence they wont lend money and will become increadingly aggressive in getting money back.

If banks don't lend money companies that rely on borrowing upfront to purchase something to sell will fold. A good example is Electricity providers (not generators) who borrow money to secure power upfront so that they then sell power to the customer at a consistent price. I'd suspect a vast number of other industries do this (buying raw materials/components/equipment on credit and getting good rewards over the long term.)

If banks reclaim money more aggressively more properties will be repossessed and more organisations will need to declare bankrupcy.

If more businesses go out of business more people will become unemployed. More unemployed people means a bigger welfare bill. Also it means less people (and companies) spending, paying tax and exporting. Which leads to further downturn, less confidence, more bankrupcy, less taxes. Well you get the picture. That of course is the worst case scenario.

When the same happend in Japan a few years ago the government dropped interest rates to 0, and bought up all the toxic debt, in return the banks had to declare everything and become transparent.

The end result, some really hard years for the Japanese financial secter - however no banks collapsed and the economy grew. Also the toxic debt became profitable and the Government turned a nice profit. Now the Japanese banks are cherry picking around the world.

Shows what can happen when you make hard decisions.

@Free handout

"Why do people keep referring to this as a free handout? They're going to 'buy' the high risk mortgages from the banks to instill confidence in the market and allow it to then recover on it's own."

Because those assets are worthless. No income no job mortgages can never be paid back, and without the inflated markets there are no buyers with money to pay for those assets. No other investor wants to buy those assets, not at any price, long term or short term.

If you were a bank that bought those, well tough luck. Other banks didn't.

If you feel they're worth something, well the banks can package those bonds for sale to the public and you can buy them. People who bought Pets.com shares as they dropped are rolling in money now,.... oh wait, they lost their money. Tough!

"If the 'bailout' doesn't go ahead, we're going to see a worldwide financial market collapse (think it's already collapsed? We've seen nothing yet!). Within 2 years we could see a big change in world powers. Will China control world financial markets? Who knows!"

Tescos made more money you know, people need food. Oil companies are high, people need oil, gosh you know what, I reckon the world will be just fine. Chinese don't have a tradable currency, they use $ for their exports so their future is tied to how the $ does in terms of real world goods like oil.

A correction

When I said "I note that central banks pumped 620 billion into the markets yesterday alone" I may have given the impression that all that cash was actually available yesterday. That was indeed my own mis-apprehension as I browsed during breakfast.

http://business.timesonline.co.uk/tol/business/markets/article4844255.ece

Turns out the cash was merely promised, which makes it about as secure as the $700bn would have been, but I think my point still stands. Plans and promises to make vast amounts of cash available are *not* helping, because no-one actually knows how much bad debt there is, so no-one knows how much cash is "enough". What needs to happen is for banks to publish their positions. We can either do this the easy way (let them go under and wait for the administrators to report) or the hard way (get our politicians to grow up for long enough to pass and enforce legislation making this information public).

A small matter

The US Government has forgotten 1 small detail - They don't have $700bn in the reserves. It is all owed out to China. The US now has more national debt than any other country in the world, standing at a staggering $7trillion and then some.

Collapsing economies

The US economy, as it stands, will collapse in on itself. The first and foremost to go under will be banks engaged in lending money to people/companies who should have never have been given that money. Once those are gone, you'll see a collapse of companies that attempted to make money off the banks involved. The result will be a significant reduction in the overall US economy, a big cut in their GDP and as a result, a rapidly declining dollar price.

Some European financial instutitions that put a lot of money into the stupid US banks will get pulled down with them. The rest however will find that oil prices plummet (the US after all no longer has the money to throw at wasting lots of oil, oil demand will go down), overall speculation on oil prices will decrease, companies relying heavily on that speculation will go under.

Most of us in the EU will however find that energy and fuel prices will finally drop for a change. Many commodities and food will decrease in price, while unemployment figures will rise a little, but most of the employment will be the people that previously made big fat profits, mostly people who will, within a few years when the worst of this all has blown over and the EU financial market starts to climb again, be able to get a new job if they were competent.

@retards

One of the minority sensible posts here. If this all goes bad, it'll make 2/3 of a trillion look trivial. All the bleating of "don't want" - be careful what you ask for, cos you might get it, and the way things are looking you possibly will anyway. And it'll hurt.

As for slowing servers, can't they just make the docs moderately small (strip images) and cacheable then let squid do the rest? I mean, isn't what all the cacheing directives in http are for?

@@ a small matter

Not over $10 trillion just yet:

http://www.brillig.com/debt_clock/

RE: I would have expected more from Reg readers

You obviously don't have a clue yourself. The UK housing market is the most over inflated in the world. the economy has not been growing at a rate that would make 100% house price rises in less than 10 years sustainable. This has to a large extent been driven by the greedy bankers loaning money to people they shouldn't, reducing the available housing and forcing prices upwards. If a house costs £100000 now you can pretty much bet that its ACTUAL value is around 50-60k. So all these commodities you seem to think will be worth the same once the trouble is over are in reality worthless.

I'm betting the housing market in the US is in about the same state and it will be a long time before things actually start to balance out, never mind start to climb again.

As for 'The US Government will buy at the undervalued price, and have a hefty profit in 5-10 years' time when they sell.' you fail to take into account

a) how much further prices will fall (and they will)

b) how much maintenance will cost during those 10 years (if you don't keep it in good order the price will fall further)

c) The ability of people to pay rent on those properties. recession = lower employment = able to charge less for rent or risk having the house stand empty = more for you to pay in maintenance

d) The tax that must be paid on those properties - even if the government owns them. If they make them tax free, the hard working people still paying tax on their property will revolt.

As for the pensions, in the UK pension funds are regulated under a much stricter set of guidelines than investment funds and despite 1 or 2 high profile cases (e.g. Robert Maxwell and the Mirror fund) very few people have ever lost money when compared to the amount of people that pay into a pension. We also have the Pension Protection fund to help those unfortunate few who really have been screwed over by the companies they worked for. Maybe it isn't the same in the US, but you can blame the government for that as most of their policies are designed to help big business and the rich with very little provision for the actual workers.

@those that think this bailout money is actually going to do something useful

Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."

At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality.

Follow the money. Average Joes and Janes are not the holders of the other side of complicated, over-the-counter derivatives contracts. Rather, hedge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.

Rescuing financial institutions is not the best solution. Yes, banks are needed to provide capital to businesses. But it is not necessary to spend $1 trillion to maintain liquidity. If the government is to intervene, it should pick and choose which claims to purchase; claims that are directly tied to mortgages would be a good start.

So I stick to the point I made in the first post. Wasting what little money we have available on the national credit card by giving it to the incompetent fools who blew the money of investment banks is not the way to fix this crisis.

Maybe you don't like the idea of building infrastructure, but in today's world infrastructure does not necessarily mean roads and bridges. It could be used to give $15 billion to every State to overhaul it's communications. Ripping out the copper and replacing it with fiber. Besides the re-employment of tens of thousands of engineers, the industries that support this kind of thing would boom as well.

The jobs created in manufacturing and construction that would be required to support building such a network would also be high paying jobs. It would put the US back on the technology map, because the upgrade to the internet alone would be something innovative technology companies could make good use of.

I still hold that this is a somewhat more viable plan to pull the US out of recession, rather than giving $700 billion to a few useless idiots that put all their banks' money in hedge funds and other high-risk investments - like mortgages for the homeless.

As for credit, well it's up to these banks really, but if their business is to make money from lending, not doing so will mean what? They no longer are in business? I'm sure other lenders will be more than happy to buy them out and take over their market. In fact I think you'll find that's exactly what's going on right now.

You got to love'em guys

Amazing how the same guys who want a totally free and unregulated market when they can make big bucks out of it are suddently crying for public money when their own stupidity puts them in the shit. Yes, I'm looking at you, MS, and also at you, the 2 or 3 wannabe-pigopolists commentards.