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I am posting this from another site, not 100% sure of the numbers but it is an interesting read none the less:
Mathematics FAIL Paulson / Bernanke Bailout Plan
Known Facts
United States non-financial private debt is $32.4 trillion dollars and household debt is $10.0 trillion as of 2Q
2008* This encompasses mortgages, auto loans, credit cards, HELOCs, commercial and industrial loans, LBO
monies outstanding and all other forms of non-financial (e.g. not including margin loans and similar) debt.
Henry Paulson and Ben Bernanke have asked for a $700 billion “revolving credit line” with which to buy
“troubled” assets. Congress is strongly considering giving it to Mr. Paulson with some set of conditions.
The assertion has been made by both Mr. Paulson and Mr. Bernanke that absent this credit line and absorption
of these “troubled” assets, the financial markets will imminently seize and fail.
The assertion has been made that the taxpayer will not recognize large losses and might make a profit.
House prices are projected to fall by another 15-30% nationally (depending on who you ask); therefore,
whatever level of stress exists in the system today far more will exist over the next few years.
Mathematics
$700 billion dollars is 2.16% of all non-financial private debt and 7% of all household debt.
Provision of this credit line therefore would allow removal of a maximum of just over 2% of the current nonfinancial
private debt from the banking system, assuming only US domiciled debt is included.
If the imminent failure of the United States financial system is going to be averted by 2.16% (maximum) of the
outstanding private non-financial debt being removed from the banks’ hands and transferred to the taxpayer as
the “responsible party”, then the system is under leverage of 46.29:1.
If, as many have projected, the actual losses to be sustained are $2.5-3 trillion in residential housing and a like
amount among commercial real estate, credit cards and LBO loans, then the aggregate requirement is not $700
billion – it is in the neighborhood of five to nine times what has been requested. If this is the case the
aggregate requirement is double the US Federal Budget. The government cannot raise that amount.
Conclusions
Either (1) the system is not about to fail imminently OR (2) it will fail irrespective of whether this bill passes,
as the actual amount required to “resolve” the problem exceeds the government’s ability to finance it.
If no failure is imminent then we are giving $700 billion to the people who caused the mess for no purpose
other than enriching them.
If the latter then we need the $700 billion for social programs and other spending that will become necessary as
we work through a financial collapse and crisis worse than anything since the 1930s.
I don't know where your numbers are from. What I heard is that the total of all mortgages (commercial and residential) is in the neighborhood of $14 trillion, and that the $700 billion was set as 5% of that number. Citicorp recently sold mortgage related assets at $.22 for each dollar of face value. That would indicate that the $700 billion could purchase up to $3.5 trillion, give or take a few billion, in face value of mortgage assets. That would be fully 25% of all outstanding mortgages.
The problem with the underlying mortgages is being grossly exaggerated
When you default on a mortgage, the loss is the difference between the property value and the principal on the mortgage.
Real estate prices would only contract another 15-30 percent if unemployment went out of control. Just like the stock market, there is a floor at which rational buyers will jump back in.
Why do we care about commercial mortgages? Default on those just makes "rich" landlords less rich.
The 700 billion is as high as it is so they can recapitalize Wall Street firms that bet and lost
Paulson is not looking to buy these mortgages and securitys at a % of face value, but at the $ amount that the holders say they are worth.
mattie
Bingo - and therein lies the problem. The majority of the committed $700 billion simply constitutes a gift to Wall Street, beyond what is needed to address the issue with the mortgages and contraction in investment. That's why the public is opposed 10 to 1.
Don't forget foreign assets, this 700 bill also allows the treasury to buy toxic assets from foreign contries as well, so you can't just look at the numbers from the US.
Bullsh!t !!! The $700-b isn't going to solve anything. It is to "float" the economy until "beautiful people" can get their investments out of American dollars, and until a new pres is seated. Then the house of cards comes tumbling down.
Consumer confidence made a small gain in September, according to the Conference Board Consumer Confidence Index published Tuesday.
The Index is at 59.8 for September, up from 58.5 in August.
"September's increase in the Consumer Confidence Index was due solely to an improvement in the short-term outlook,” says Lynn Franco, director of The Conference Board Consumer Research Center. “However, these results did not capture all of the tumultuous events in the financial sector this month, and until the dust settles a bit more, we will not know the full impact on consumers' expectations. Shocks, such as the 1987 crash, generally tend to have a temporary adverse affect on confidence, lasting on average two to four months, unless they result in significant job losses. Just as noteworthy, consumers' assessment of current conditions continues to indicate that the current economic environment remains quite weak."
Those who said business conditions are "bad" increased to 34.2 percent from 32.7 percent, while those claiming business conditions are "good" fell to 12.5 percent from 13.7 percent in August. Those saying jobs are "hard to get" climbed to 32.8 percent from 31.7 percent in August, while those claiming jobs are "plentiful" decreased to 12.2 percent from 13.5 percent.
Consumers' short-term outlook improved again. Those who expected business conditions to worsen over the next six months shrunk to 21.3 percent from 25.2 percent, while those expecting conditions to improve rose to 13.5 percent from 12.0 percent.
Damaged consumer confidence is seen as an indication of poor prospects for spending. Consumer spending accounts for two-thirds of the United States' economic activity.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. Custom research company TNS conducts the monthly survey for The Conference Board.
remember, gas prices was the icing on the cake.
historically prices on the street run 50/60 cents higher.
the wholesalers/pumps are getting a extra doll for every gallon.
we are being robbed at the pump,
so are bussiness that depend on oil to manufacture products.
till the price of gas drops the industrialized country's will be taking in the rear.
Eyeball - 10/1/2008 12:05 PM Bullsh!t !!! The $700-b isn't going to solve anything. It is to "float" the economy until "beautiful people" can get their investments out of American dollars, and until a new pres is seated. Then the house of cards comes tumbling down.
You ceratinly are into the doom and gloom. If I believed that as much as you say you do,I'd move to cave somewhere.
Some folks might have some rough times ahead. But many won't. The sun will come up tomorrow, either way.
fidhhook54 - 10/1/2008 9:40 PM "the Economy is fine", is a good Economy, theres no need for bailouts. they over reacting. the damage that has been done 700 billion is a drop in the bucket.
I agree. Look at the articles............. http://www.bizjournals.com/austin/st...9/daily23.html Consumer confidence made a small gain in September, according to the Conference Board Consumer Confidence Index published Tuesday. The Index is at 59.8 for September, up from 58.5 in August. "September's increase in the Consumer Confidence Index was due solely to an improvement in the short-term outlook,” says Lynn Franco, director of The Conference Board Consumer Research Center. “However, these results did not capture all of the tumultuous events in the financial sector this month, and until the dust settles a bit more, we will not know the full impact on consumers' expectations. Shocks, such as the 1987 crash, generally tend to have a temporary adverse affect on confidence, lasting on average two to four months, unless they result in significant job losses. Just as noteworthy, consumers' assessment of current conditions continues to indicate that the current economic environment remains quite weak." Those who said business conditions are "bad" increased to 34.2 percent from 32.7 percent, while those claiming business conditions are "good" fell to 12.5 percent from 13.7 percent in August. Those saying jobs are "hard to get" climbed to 32.8 percent from 31.7 percent in August, while those claiming jobs are "plentiful" decreased to 12.2 percent from 13.5 percent. Consumers' short-term outlook improved again. Those who expected business conditions to worsen over the next six months shrunk to 21.3 percent from 25.2 percent, while those expecting conditions to improve rose to 13.5 percent from 12.0 percent. Damaged consumer confidence is seen as an indication of poor prospects for spending. Consumer spending accounts for two-thirds of the United States' economic activity. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. Custom research company TNS conducts the monthly survey for The Conference Board.
Consumer confidence? Really? After the president goes on national TV 4 days straight and tells us to panic? Not many folks listen to much of what Bush has to say any more for good reason, but for those who do, I guess it could rile them up pretty good.
joenew61 - 9/30/2008 4:21 PMThe problem with the underlying mortgages is being grossly exaggerated
I
That, I agree with. The "problems" are that some people were trying to use them to make money on top of money. That is the house of cards that has come crashing down due to the foreclosures. The foreclosures themselves, I think, could be dealt with. For less than 700B.
Interesting numbers on the economy 
IGFA Certified Observer
