George Bush speaks...

Before the president speaks...

It's not clear to me what the 'sides' are that the Democrats and Republicans are on. I mean, yesterday it seemed they were all trying to get some information and negotiate some things. They were doing it together. Now it sounds like they have separate plans or something. I think the media is twisting the story to make it easier for them to report and understand - us vs them.

And its not clear to my why the pundits think John McCain has to make some kind of choice. He is supposedly either going with the President and against some of the Republicans. Or, he will go with the Republicans that do not support the bailout and go against the President.
But, I thought the President's plan was already changed and morphing before our very eyes - that's what the negotiation was for. So, of course, no one will go with the President's plan. That makes no sense. Paulson has already agreed to modify his original plan so it includes oversight and a limit on executive compensation. I think the media is a step behind. Or am I?

Bush speaks...he looks scared and like a robot kind of.
Lots of bad things are happening in the economy.
Banks have restricted lending so people can't get loans (auto, home, car, credit card, inventory, tuition, etc.)
Because banks are holding assets and restricting credit - our entire economy is at risk.
With the bailout, banks can avoid collapse and resume lending which preserves the overall economy. People can get credit for their daily needs.

1. How did our economy reach this point?
for more than a decade a lot of money flowed into this country from abroad.
Large influx of money, and low interest rates, made it easy to get credit.
People borrowed for cars, new businesses, college tuitions, etc
In the housing market - easy credit and the assumption that home values will always rise led to bad loans.
There was a boom in home construction.
Number of houses increase
Now, demand is less than supply
Home values drop just when adjustable rate mortgages start adjusting.
many mortgage holders began to default
In the meantime...
Home loans are packaged togther and converted to mortgage backed securities and sold around the world.
Investors didn't ask questions.
Fannie Me and Freddie Mac bought a lot of them

Decline in housing market set off domino effect
value of homes decline
homeowners default on loans
Mortgage backed securities lose their market. Value is zero when no one wants to buy them.
Investment banks have large numbers of assets they couldn't sell.
They can't pay their bills.
Banks started holding on to their money

*****

If we don't fix the problem people will lose their jobs, banks might fail, America could panic, it will be harder to get credit.
We must not let this happen.

McCain and Obama and Congressional Leaders will discuss this tomorrow in Washington.

How would a rescue plan work?
remove risk posed by troubled assets including mortgage backed securities
free banks to resume flow of credit to families and businesses
taxpayers are protected
welcome participation by all institutions.
failed executives do not receive a windfall
a board oversees implementation
it should happen quickly

The government will buy the securities for a small amount of money and have the patience to hold the securities until their value goes up and sell them back for a higher price - or hold until maturity.

*****

My thoughts - he didn't look comfortable or happy. Kind of sad.
He didn't talk about the free-wheeling "greed is good" attitude of the investment bankers.
He ignored the fact that the banks created new securities to continue the party going long after it was over. He didn't mention deregulation as an issue.

I like my trickle up theory better.
But, I suppose its going to end up that the bill will pass. Everyone's getting the full court press.
America wants everyone to slow down and wait a little bit, but the congress people are already on automatic about 'we need to do something'.
Maybe we need to begin to FEEL the effects of doing nothing before we do something.
At this point, that's about the only thing that might convince me we should do this.
Maybe they should put this plan into place but not take the money and see what happens for a couple weeks. Yes, we'll lose money, but it sounds like most of America is willing to try and wait it out.
Ah - who am I kidding, people will panic. As a country, we don't know how to be calm. Somebody will think they're not going to get theirs so they'll go to the bank and take their money out and the rest of the people will panic and there really will be a run on the banks.
And, truthfully, the minute even one person lost their job they'd blame the congress for not putting the plan into action immediately.