Word: bailouts
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...Sept. 29 of this year, as investors and traders reacted to Congress's rejection of the bailout plan presented by Treasury Secretary Hank Paulson, the stock market sell-off was dramatic: the Dow fell nearly 7% that day, a one-day drop that has been matched only 17 times since the index's birth in 1896. From its peak last October, the Dow has fallen more than...
...Indeed, even without the $700 billion bailout, Paulson has already written some big checks - to cover the subsidized sale of Bear Stearns to JPMorgan, the nationalization of mortgage monsters Fannie Mae and Freddie Mac, the bailout of insurance giant AIG and the sales of Washington Mutual to JPMorgan and Wachovia to Citigroup. All of this will cost somewhere between $200 billion and $300 billion...
...Given the immensity of the crisis, a Congress-approved bailout may be just a short-term fix. But a short-term fix is better than no fix. If nothing else, it would signal to the world that - unlike in 1930 - the U.S. is doing what it can to avoid financial calamity and sidestep Depression...
...Depression 2.0 Can Still Be Avoided At the moment, a reworked bailout deal seems likely to pass. But the world may still be heading for a severe downturn. Interbank lending remains stubbornly frozen, despite the Fed's liquidity fire hose. With WaMu and Wachovia wiped out, the stampede out of bank stocks and bonds will surely claim new victims. As the recession bites, Main Street firms will start going bust too. And the impact on the $62 trillion market for credit-default swaps could be explosive...
...Sins of Our Fathers In response to the Sept. 22 article "Bailout Nation," wouldn't it be helpful to just call a pig a pig? In the article, no mention is made of the fundamental reason for this huge bailout of the mortgage industry: The failed mission of the Republican Party from Reagan through McCain to deregulate America and to let the "market" prevail. It is now very clear that when the "markets" are allowed to operate willy-nilly, the self-interest of politicians indebted to lobbyists will prevail. It also does nothing to reassure the middle-class taxpayers that...