Who Benefits Most From The $700,000,000,000.00 Bailout?
Graph by Rick Taylor
News – Financial Bailout
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and the rest of the world so our stock markets don’t take a dump in unison.
It’s not a bailout – it’s a buyout of mortgages. The mortgagee would be making their payments to the govt.
thats what it should be. but thats exactly what it isnt.
I hate the way people don’t understand the way graphs and grammar work.
This graph says that 90% of the people that caused the crisis benefit the most.
And also 15% of people richer than you benefit the most.
And -5% of you benefit the most.
There can be only one person or group that benefits the MOST. The graph should be titled “People who benefit from the bailout.”
This is akin to saying “One half is bigger than the other.”
I think graphs like this are attempting to point out % chance.
Besides: Semantics
It’s funny because it’s true.
I don’t think he’s listening……..lol
easy, tiger
I think this person is in the 90% of people that caused the problem to begin with.
Right, because people that are smart and educated most likely are the ones to blame. *rolls eyes*
No, it’s because though the TITLE of the graph is “Who Benefits the Most?”, the y-axis is titled “percentage of benefit.” So the people who “caused the problem,” in receiving 90% of the benefit, do, in fact, benefit the most. The title of the graph is just a description of what the graph is trying to explain, not a statement of the way in which benefit is to be measured. In that case, the title of the graph would have been “Who benefits most from benefitting the most from the bailout?” Woop woop woop!
Jim,
The ‘educated’ and ’smart’ guys decided to milk an over stretched credit market by lending people they KNEW were a bad risk.
Seems to me ‘retard’ is the only good word for them if they couldn’t see that the market would explode in a VERY ugly fashion, and, even better, manage to all but bring down markets that have a minimal ’sub-prime’ element.(wonderfully Orwellian double speak) With due respect, you may ‘get’ graphs (and I think that is a dubious bit of hubris on your part) but you’re a cretin.
Take that in the constructive sense it’s meant… avoid sharps, and take extra care with medication and crossing roads.
I have the feeling that “those” people don’t hang out on “this” site.
It is percentage of BENEFIT, not percentage of people.
ManfredMom- right, so the people who needed help in the first place are still screwed. YAY!
Danyell, thats not entirely true. By the govt buying up those mortgages, they allow the people who are facing foreclosure to re-fi and in fact pay lower more stable mortgage payments, and the govt can absord the hit, because in the end it is better for the people to pay there mortgages. They stay in there home and the govt makes money in the end, because a vast majority of these securities represent mortgages that in the end, will be paid.
True. And they don’t lose their house and join welfare, thus saving the public even more money.
But…I like donating to charity every single check I have. I mean pay more for the charity than I do for my Federal and State Government taxes, and I live in Pennsylvania, where the State Tax is almost as much as the Federal…except you can’t get any of it back at the end of the year.
Who said they’re going to lose their job? If this is the case, they shouldn’t own a house and shouldn’t have qualified to buy one.
Actually, I don’t believe what you said to be entirely true. I don’t believe that this money will go directly to fixing mortgages, especially since bank owners are getting the largest cut for themselves. If you are going to do that, then why not give this money directly to the homeowners (aka soon-to-be-homeless)? Where are the guarantees that they will get their homes back after the bail out?
Just about every point you made is entirely false.
The .gov wants to buy these mortgages because the banks own too many that are priced at a level that makes the banks instantly insolvent. Their theory is if the irresponsible banks are made whole, they will start to loan again. The problem comes from the demand side, not the supply side. People are tapped-out, and all their collateral is encumbered by debt. They can’t borrow if they wanted to.
Banks won’t loan to one another because they know that the bulk of the banks are insolvent. You wouldn’t loan big money to a burned-out meth addict, and banks won’t loan to their equivalent.
People would be better off being foreclosed, renting for a while, and then repurchasing at a lower price. Keeping people in a home that they can’t afford in the first place only makes it less likely they will be able to spend. That person is an instant black hole with regard to money circulation.
The .gov has no prayer of ever collecting on these debts (which is why there is no market for them), as the housing contraction will continue until home prices fall within reasonable, historic, and sustainable levels in relation to incomes. By hiking taxes to pay for this program, you lower income and job opportunities. If not, we would do this all the time.
If there was an easy solution, we would have done it by now. Paulson would have advocated this 18months ago when this crisis was made public. He didn’t because it won’t work. The only reason he is trying this is because the banking system has been insolvent for 10 months, and the Federal Reserve has finally run out of reserves. Throwing $700B at the situation will have a very short lived effect, and will only serve to make the situation worse.
If you want panic, then imagine the .gov throwing $700B at this and the market shrugging it off and the problems persisting. At that point, you will have panic, as the .gov would be seen as incapable of stopping the debt tsunami.
The gov’t’s plan wasn’t to buy mortgages, it was to buy mortgage bonds. Big difference. The problem with the bonds right now is that the banks can’t value them (as they’re required to at the market price – but the market’s frozen solid). Hence, they can’t count them against reserves. Hence, they’re skating on thin ice. The damn things HAVE value – most of them are still paying principal and interest. It’s just that the banks can’t count then as cash reserves (and it’s notable that insurance companies, who are allowed to account for them differently, are not in trouble despite holding similar positions in bonds).
The bailout was simply a government swap of cash for bonds…probably at 30-50 cents on the dollar. The banks – hence the credit markets – get liquidity, the government’s exposure to risk is low (since the risk isn’t in the bonds’ payments, but the bonds’ marketability, and the government doesn’t have to mark them to market), and in several years the government can probably sell them back to the financial companies. Worst case…the government holds them for thirty years, collects payments on them, and probably still makes money off them (conservatively, most of these should return about 15% on what the government would pay for them).
Now…no one’s willing to borrow or lend. NO ONE. What that means, in part, is that companies with a biweekly or semi-monthly payroll and a 30-day accounts receivable cycle will suddenly find themselves unable to draw on short-term credit to meet payroll on Oct 15th (I just got laid off today because the client’s credit evaporated and my company isn’t getting paid). Construction, which relies on credit (do you pay up-front for a house? No, the builder builds on credit and repays when its sold) comes to a grinding halt. Gas prices start to go up (stations don’t pay cash to fill their tanks, they use short-term credit and pay that off with pump receipts). And so on. The country runs on short-term credit. And right now, because the banks have no cash available, there is no short-term credit. Very shortly, unless liquidity is restored, that WILL trickle down.
Unfortunately, the average American won’t understand that until their paycheck stops, or they can’t refinance their home. And unfortunately, our so-called “leadership” in this country is too stupid to explain it.
Tom, thanks for that explanation. It made the situation a lot clearer to me, as well as the potential consequences and solutions.
FINALLY!!!!! Someone made a clear and educated statement! Thank you!
It was fully ignorant on the official’s part to call this a “Wall Street Bailout”.
It gives the impression that it was written solely to aid people who already
have millions, and to screw the people who are already suffering.
If our leaders want us to be able get behind their actions, they need to
put everything they’re proposing into a language that the general population
can understand. Very few of us have majors in economics, and it’s difficult
for us to be able to sift through the babble.
You explained everything beautifully!
Congress should hire you as their spokesperson to the public.
So it is the taxpayers job to take care of a companies fuck up?
Or it could be the government attempting to remind the kind citizens of the US that: you’re in a financial shithole. Half of you have bought things you cant afford, with money you dont have.
To put it another way, the US market has plummetted in the last few days, and the Australian economy (and others) are following suit, as a direct result of the US mortgage crisis. By buying out these loans, the government will encourage banks to lend money to other financial groups and businesses again, meaning they can pay their employees (i.e. Joe Smith down the street), meaning the employees can pay off their loans. Which means the government recoups some of its money. Thus attempting to avoid a massive economic depression.
How are you people not getting this?
Be able to lend money to businesses to pay their payroll? That’s not exactly the best fiscal policy I’ve ever heard of…
Banks still will not lend. Even with the bailout.
They will see that the economy is going down the tubes (business failures, profit declines and layoffs). They will not be able to find enough “creditworthy” borrowers in this environment to make a real dent in the problem.
The only thing we know is that the Fed is now off the hook for the cost of these toxic loans.
Now, it’ on the back of the US taxpayer.
This is a travesty beyond belief and will lead to austerity measures in the US, like those imposed by the IMF on delinquent debtor nations.
Their, there, they’re
If you want to appear intelligent, learn the diference.
ABSORB
not absord
You seem to be able to repeat what you’ve heard, but unable to form your own thoughts.
*AHEM* Bryan, we, the taxpayers, are going to pay for it. Where does the money come from in the first place? The welfare recipients themselves? *GUFFAW*
Here’s a novel idea: Work hard, pay your bills on time, don’t overextend your credit, be responsible and actually QUALIFY for a loan in the first place… OH WAIT! this is America, home of those who are unfamiliar with delayed gratification. I mean why should we be familiar when we have Democrats that will pay anything to keep us down and dependent on their handouts…. ? Party for the people my hind-end….
No better than the “new-age” conservatives (IE: Bush) who seem pretty interested in sinking a trillion dollars into building Iraq’s economy. Why can’t we just elect moderate? Smaller government with limited social programs works fine, but there’s too many idiots running the show…and people are suckers for pundits and rhetorical lies so long as the TV ad plays enough times to really sink it into their brain.
The entire economic system is based on debt. The U.S. dollar is not representative of actual value, it is instead an IOU. You get it from someone else because they owe you for goods or services. You can then hand that to someone else in exchange for goods or services, and the people you got it from got it from somewhere else… etc. It never actually had any value. In fact, it was pulled from a bank which basically created the money out of nothing and has only (required by law) 1/9th of itself backed up by anything (but they have found loopholes in the law that make it so they can loan without having anything to back it up). The original bankers (originally goldsmiths) figured out that sheeple don’t pay attention to things like that, so they started this whole business enterprise.
Inflation happens when too much of this IOU paper is circulated and not backed up by anything. If the current bailout spending rate of the government continues (they are also “allowed” to create money out of nothing) for too long, then the U.S. dollar will be virtually worthless. It (surprisingly enough) would probably be a good thing if someone took a few hundred billion dollars and burned it like the Joker, except that amounts that large are often “insured” and therefore if you lose it, they will just write it back into your account.
The idea of short term credit is great… if you’re just getting started and can’t afford to back anything up. But if you can afford to back it up, then you’d actually be pretty stupid not to. U.S. business people are not very smart…
That great Austrian school of economics. They predicted the 1970’s!
you know… throughout Ron Paul’s campaign I never completely got how insane he is… now I see it. Bernanke really slapped him in the face there: “As to our authority… of course The Constitution gives The Congress the right to coin money and regulate the value thereof and that has been regulated to the Federal Reserve through the Federal Reserve Act and everything we’ve done is directly based on that act. Now if you disagree with the act, thats a different issue, but we certainly have the authority from Congress.”
The Federal Reserve is a private bank. So you fail.
Yes. I know that. I was quoting Bernanke in the video above…
*fail*
I’m thinking of buying a house really soon, because everyone else is broke, now is the time to make my move into making a little more money!
Same here. I am looking to buy b/c I have great credit and money to put down. Its a matter of which one and where. By the time the dust clears I’m sure my house will be 3 or 4 times what I paid for it.
Well, since the banks’ interest rates to each other increased from 2.5% yesterday to 6.9%, good luck in getting a loan with any kind of decent interest rate!
Why not give some help to the people that need to pay their mortgage. And while they’re at it… make the rates FIXED! None of this would have happened if the damn rates were fixed.
We now know that tricke down does not work. Let’s try trickle up.
Yeah, crappy ARMs. Thanks to government institutions like Mac and Mae and their affordable housing (read welfare.)
Y’know, Matador…
I read what you wrote and I didn’t understand it. Then I read it again, and still don’t quite get what you’re trying to say. So I read some of your other comments in order to help me better understand the way you write and the thought process behind such writing.
I came to the realization that I don’t understand what you’re writing because you use words and terms that sound like they should be saying something but really are saying nothing.
Why don’t you just say what you’re trying to communicate, if you have something viable to contribute.
You write like Sarah Palin speaks.
I agree.
Here’s a novel idea: Work hard, pay your bills on time, don’t overextend your credit, be responsible and actually QUALIFY for a loan in the first place… OH WAIT! this is America, home of those who are unfamiliar with delayed gratification. I mean why should we be familiar when we have Democrats that will pay anything to keep us down and dependent on their handouts…. ? Party for the people my hind-end….
Its so true… it makes me sad that people are still holding on to “Reganomics” (though he didn’t invent trickle down economics) despite the constant negative outcome every time its implemented.
The definition of insanity is performing the same action and expecting a different result
KA – Reagonomics didn’t fail, it was superceded by a lesser philosophy which forced banks to make unwise loans to risky debtors. Reaganomics is no-where in that picture, that’s pure Clinton-style socialism driven by PC philosophy. Unfortunately not repealed during Bush II’s reign.
Reganomics is a way out of this mess.
Um… Why do people keep thinking that banks were “forced” to give out bad loans. Even the most ignorant/idiotic banker knows better than to give money to someone who can’t repay it.
NOBODY FORCED ANYONE TO GIVE A BAD LOAN. The deregulation/self-regulation of the securitized debt market (enter credit default swaps) allowed banks to give out any money they wanted and instantly sell the loan into the market. Your unregulated, Reaganist, capitalism, allowed the market to create the noose with which it proceeded to hang itself.
I’m against socialism, but this is nothing more than the free market getting what it deserves. Stupid people applying, stupid bankers accepting, stupid investors buying. Welcome to the reality of free markets. Flashbacks to Enron anyone? Anyone?
Stop the “bailouts”, let people suffer and learn. Don’t let the Dems throw socialist solutions at a capitalist problem.
This graph, and people like the person who made it, are the reasons that the vote in the House failed.
Well, this graph is true. So the measure should have failed. It’s about time the people stood up.
AS TO ALL GRAPHS.
FIGURES DO NOT LIE
BUT
LIARS FIGURE!
This is so unfortunately true.
I hate the “Bail out thing” It failed anyways.
If you buy into the bailout……Fail.
Greatest Scam in recorded history.
Real bold brass.
You did not impeach- here is the result.
What are you smoking? Former President of the United States Bill Clinton was impeached by the House of Representatives on December 19, 1998. (The Senate caved.)
He and the Dems of the 90s are the reason we’re here in the first place…. GO WELFARE!!!
Here’s a novel idea: Work hard, pay your bills on time, don’t overextend your credit, be responsible and actually QUALIFY for a loan in the first place… OH WAIT! this is America, home of those who are unfamiliar with delayed gratification. I mean why should we be familiar when we have Democrats that will pay anything to keep us down and dependent on their handouts…. ? Party for the people my hind-end….
I do.
A man called Eric who lives in Luton?
The Bailout, at its center, is a bailout of the Federal Reserve and its private backers. Before Congress agreed to put taxpayers on the hook, the Federal Reserve bore the entire risk of the toxic waste they had taken as collateral for their trillions in loans to insolvent banks. Now, with the Bailout, the Federal Reserve has shifted the risk to the taxpayers, and has ensured that it (the Fed) will be repaid, with interest – by taxpayers who must pay or face imprisonment by the government (IRS).
This is the truest graph I’ve seen to date on Graph Jams.
Pathetic, isn’t it?
One thing that never comes up is where the money came from in the first place: at the start of this, the government sued WaMu (& others) for not making enough loans to those of differing economic backgrounds (read: the unemployed/minimum wage workers). This money went to the gov’t institutions, Freddie Mac and Fannie Mae/y (localize it yourself). They proceeded to loan it to people all over the world who thought the loan was backed by the US Gov’t (it wasn’t until the bill was passed). But then, now that these people can’t pay back the loans, Freddie Mac/Fannie May can’t make the money that they took from WaMu in the first place.
So, WaMu is gone, the other defendant banks in that lawsuit are gone, and the $700 billion is going, in effect, to the people who took out the loans, because they don’t really have to pay the government back. The $700 billion that will be paid in inflation by the next generation.
actually it was government regulation that started this whole mess. gov’t said that mortgage companies HAD to lend to a certain percentage of minorities. many of these people weren’t qualified for the loans and ended up defaulting.
Ok, the bailout was 700 BILLION.
The amount on the graph is 700 TRILLION.
How am I the first one to notice this? This is graphjam for f*cks sake, you guys jump on EVERY mistake!
Because it’s 700 billion and not 700 trillion. You’re reading the 2 0’s at the end which are actually cents and not dollars and making it trillion.
Hold my drink, bitch.