In the end it is not the banks who get bailed out, it is actually the consumer, who will be again able to (at least this is the plan) to take loans and spend money on stupid things.

That may be the plan...but it's not going to work. That's my main beef with this.

I see flaws in your reasoning too, BMW.

There are two underlying problems here:

1) The people of the United States, cumulatively, in the past couple of years have consumed about 6.5% more than they have produced. But this is not something that happened overnight, it comes on top of almost three decades of consuming more than we produce.

2) As a result of decades of consuming more than we have produced, we have accumulated huge debts.

Firstly, I question your assertion that "in the end it is not the banks who get bailed out, it is actually the consumer, who will be again able to (at least this is the plan) to take loans and spend money on stupid things."

But even if your assertion is correct, are we to believe an appropriate response would be for us to support an expenditure of $700 billion of taxpayer money, including those taxpayers of us who do not over-consume, so the over-consumers can keep on over-consuming like there's no tommorrow?

Your argument is internally inconsistent. The solution proposed does not address the underlying problems.

This is a in effect consumer society. In the end it is not the banks who get bailed out, it is actually the consumer, who will be again able to (at least this is the plan) to take loans and spend money on stupid things.

And without consumption various taxing schemes go south.

Not to mention that taking tax money (that would be American's money) and handing it off to others means that PART of that money leaves the US of A.

To 'chase' goods in other lands. Like, oh, say oil.

This won't start the banks lending again. There's nobody else left who's creditworthy enough to lend to, 'consumers' don't have the means of servicing any more debt.

All this seems to do is transfer money from the poor to the rich (via future tax obligations and inflation) before the whole thing collapses.

If a depression liquidates a large amount of debt the Gini coeffient will probably fall closer to 0 (perfect equality). Which it did during the Great Depression (see here).

I think the elite are trying to save their relative wealth, that's all.

In the end it is not the banks who get bailed out, it is actually the consumer, who will be again able to (at least this is the plan) to take loans and spend money on stupid things.

Are you joking? You actually believe this is going to benefit consumers? How do consumers benefit? Paying for the excesses of the elite? Watching our purchasing power shrink away to nothing? Having the gov't own our homes? Having to abandon god-knows-what present and future programs to service a debt that is not ours?

In the end it is not Paulson's and Bernanke's fault, the problem is that capitalism can't grow without limits, especially not when energy is becoming a problem.

Ah, yes, the problem wasn't Hitler, it was Nazism. The problem with Iraq isn't Bush and Cheney, it's fundamentalism and fanaticsm...

Unbelievable.

Cheers

(So is the other option that the banks are holding the government hostage...bail us out or we will crash the economy)

thats exactly how it looks. the banks are saying, pay us now this lump sum, or else the american people will suffer so badly, that they had wished they had payed us sooner.

far as I can see the banks are in a win win situation. either way they get their bailout money, they are going to either get it up front, or wait 10, 20 or 30 years of interest payments made back to them. which is where they would suffer the most. we the tax payers would actually suffer the most, it's just the banks would struggle a lot longer till its paid.

either way, it looks dire for the tax payer.
depression here we come.

Certainly no one is condoning the Old Testament laws that command that investment bank CEOs be punished for absurd reasons such as golden parachuting on the Sabbath? (sarcasm off)

I just listened to the Bill Moyers interview from your link. It was great. It mentioned that the Government now owns 80% of AIG. In effect, the company has now been nationalized. A quote from Floyd Norris from the interview:

But I can only envision what the right wing would be saying if a liberal Democrat had decided to nationalize the biggest insurance company in America. I don't think you'd be hearing a lot of praise for it.

Right! The amazing thing is all this is happening on the watch of a Right Wing Republican President. The world is turned upside down. I think this is an act of desperation on the part of the party in power. This prevents, at least in their opinion, a total collapse of the economy. Perhaps, perhaps not. Anyway, as McCain said, all this is above my pay grade so I will not attempt to analyze it.

But I will say that past actions by the fed, dropping interest rates to ridiculously low levels in an attempt to keep the economy booming was a major cause of the debacle. And a total lack of banking regulations also was a major contributor. Real estate prices were booming and everyone wanted to make a mint by buying then "flipping" their investment to make a fortune, (something for nothing), was another cause. Rates were so low and loans were so damn easy to get, everyone tried to make a mint in the real estate market.

Then the housing bubble collapsed and the jig was up. It all really pisses me off. There was greed, greed by people trying to get rich as real estate markets soared. Then the greedy got burned. And we all, us taxpayers, are the ones to suffer.

Perhaps this is the beginning of the end. Sad.

Ron Patterson

For the first time ever I've contacted all three of my congresscritters. Unfortunately, I don't really think it matters what Americans think. Congress will smear some lipstick on the pig, pass it, and go on recess so they can campaign to keep their jobs.

Evidently not loud enough - and certaily nto as loud as the lobbyists.

Congress scrambles on rescue bill

On Sunday, the Financial Services Roundtable - a lobbying group representing the nation's banks - called on Congress to make the plan "broad enough to include different types of assets."

And the Treasury Department has amended its original request to give it authority to buy up not just troubled mortgage assets, but troubled assets period.

Keep in mind that Dodd is a Connecticut senator. If you have a credit card, there's a good chance the address on the back is a PO box in CT. And it's not because the state laws favor consumers there.

I would say it's their only fear. I'll even vote for Obama if he stands up and OPPOSES this, but of course with all his contributions coming from Lehman brothers it is a distinct possibility he will oppose it because his guys didn't get bailed out and for that reason alone. If there is any hope for the democrats, they will stall this in Congress until the market crashes, nothing can stop it now anyway. BTW, our Oklahoma delegation is collecting polls, you might want to try yours and let them know how you feel.

I truly believe that this is Paulson's way of taking care his friends, nothing less or more.

BTW, George Bush's philosophy can hardly be called right wing. Don't insult us like that, we don't claim him. My best guess is that his philosophy could be called "cronyism" and "I don't listen to nobody". A true right wing politician would have let everything crash, which would atleast leave a legitimate foundation in the future. The only thing this will do is prolong the agony and leave a trashed foundation. LET THEM DIE!

Bailout Detroit, atleast they can actually make something which is more than you can say for any of wall street. 600billion would also revitalize alot of industries, which is desperately needed now.

What a disgrace!

It reads like a car that's run out of gas and friction is bringing it to a stop. No matter how much the government steps on the gas (to pump money into the economy), the car is still slowing down. We overheated the economy, just like we fault other, developing nations (like China) of doing. And soon, the car will be stopped and the slow process of walking to the gas station in 110 degree heat will wear us down. Should have stopped for fuel earlier, but we were in such a hurry.

Even with the bailout, the housing market will still head downward.

The average salary can't cover the loans; the prices that they are asking for today's real estate are really too high.

At the local level, if housing prices continued to fall, so too would property taxes collected by counties and towns. What would that mean? Less funding for schools and municipal services.

I don't understand how it works in other areas. In my town (and all over Vermont), we vote on the school budget and the municipal budgets directly, as a certain number of dollars for the year. Then that burden is divided amongst the households as property tax in proportion to the RELATIVE values of the houses. I.e., if all houses were suddenly worth half as much as before, everybody's tax bills (in dollars, not "tax rate") would stay exactly the same!

That said, when people imagined their houses were worth a lot, and could be sold some day (after the kids graduate from the expensive local school system), they were willing to pay more, and thus passed unsustainble budgets. Now that people FEEL less rich (in the same house with the same mortgage), they may balk. Actually I hope they do, the sooner we stop the exponential (and faster-than-inflation) rise in spending the less painful the withdrawal will be.

The CNN item reveals a financial "system" utterly broken because its fundamentals are in dire straits. Companies needing/requiring short-term loans "to meet payroll or pay their bills" are essentially insolvent--the behavior is the same as a household needing/requiring credit card debt to cover routine expenses; both are essentially examples of NOT living within your means. Personal bankruptcy and business failure in the past were treated as "Lessons Learned," and US social norms generally provided for one instance of failure to learn the appropriate lesson, which was not expected to happen again. But we now have the THIRD violation of this norm within the past 20 years, and the repeated promises of both Wall Street and the Executive branch of the federal government saying just bail us out--AGAIN--and we promise not to need another; but if "we" allow the system to work "normally" to punish the failures and re-regulate the abusers, then that would be a catasthrophy and ALL will be lost.

We've had 28 years of borrow and spend political-economy emmanate from Depravity Central, where the only stuff that trickles down is toxic sewage. Tha National Debt is an alltime high, and upper-tax rates at an all time low, while far too many corporations pay little or no tax yet ask for their amount of dole to increase yearly. IMO, the WHOLE structure of finance in the USA is broken beyond repair, its collapse encouraged, and a new democratic and egalitarian system built on its wreckage--something very similar to what ought to happen to the way medical care "system" is alloted and paid for. Such a collapse might also allow for the renewal of the rationale and compostion of the USA's national government.

I don't trust ANYONE at the federal level to do what's right and proper. Better for the current "system" of the FED and its relations to FAIL, while creating a new banking and finance system that's centered in the US Treasury Department and controlled by the people, not the investment banks. So DEATH to the secret FED-based banking "system" and its criminal partners, and LIFE to a democratic fiancial system that promotes the interests of the People first, and Big Business last.

Thom has been on the leading edge of many issues. He was the first one who turned me onto Peak Oil back 10 years ago with "The Last Hours of Ancient Sunlight". I am literally praying that if Obama is elected that he will bring Thom into his inner circle as advisor or cabinet member.

One particularly powerful point about Thom's perspective is that he's liberal and deeply spiritual too. His ethics are backed by lots of personal humanitarian work that he has done.

When I see numbers like $500 TRILLION and $1,000 TRILLION, prayer seems to be the only answer. Prayer and lots of people learning the truth about how deep this mess it.

Well, I did get this at the top of the comments on today's editorial in the NYT: http://community.nytimes.com/article/comments/2008/09/23/opinion/23tue1....

Vote it up if you like it.

I've got a more direct approach here: cut mortgage interest rate 1.5 points. http://www.theoildrum.com/node/4561#comment-412354

Chirs

As if government is going broke spending for those truly in need, rather than trying to keep its owners' Ponzi scheme alive ... Those functions you mention are what any government should consider essential, along with true defense, sound infrastructure, and a just judicial system. And any citizen living under such a government should be willing to pay their fair share of whatever it takes to provide such services, or to renounce their citizenship.

WNC is dead on the money. At root, the way in which each and every single one of us, individually, lives our lives is the cause of our predicament. It's shameful to admit personal responsibility, but until each one of us does so, and then makes the necessary changes in our own lives, we will never get anything but more of the same.

Sadly, WNC is also right about the unpopularity of such notions. As a people, we are so immured in a "something for nothing" and "me first" ethos that any other standard is unthinkable. Maybe some of the shocks that are coming will wake some people out of their wet dreams - but I think most will go down wondering what they did wrong. This nation is plumb eat up with the dumb-ass, at all levels.

Thomas:

Last I had checked, nobody had appointed me czar. Thus, I am afraid that I, personally, will be unable to enforce anything. All I can do is try to see to my own efforts to live within my means.

We have many people in this country that are very hard up, mostly through no fault of their own. Of course we don't want them to suffer any more, and of course we want to try to do what we can to help them. I would argue that some of this suffering may actually be a consequence of life in a country that is not living within its means.

"Living within our means" does not necessarilly imply a society that is governed by the law of the jungle, every person for themselves. It does mean that there is only so much to go around, and that however the less fortunate are helped, it has to be done within the limits of the resources available.