Author Topic: Financial Folks - WHat's it Mean  (Read 4494 times)

jemagee

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Financial Folks - WHat's it Mean
« on: November 12, 2008, 09:32:35 PM »
So

As I understood it - congress passed a plan giving the treasury department 700 billion dollars to spend in a very specific way

Now it seems the treasury department wants to spend it differently - which confuses me unless congress just said 'here's 700 billion, use it as you see fit'

And why is this happening, and is it coincidental that it happened shortly after the republicans lost the election?

Offline westkoast

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Re: Financial Folks - WHat's it Mean
« Reply #1 on: November 13, 2008, 11:33:33 AM »
Good thread.  I was about to make one as well to ask the same questions.  This does not make much sense to me and I was hoping to be more clear about it.  The local news (TV or Radio) have done very little to elaborate on what they reported yesterday.
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Offline rickortreat

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Re: Financial Folks - WHat's it Mean
« Reply #2 on: November 13, 2008, 05:33:08 PM »
The reason is simple.  The government lent the money in the hopes that it would unfreeze the credit markets and business would be able to get loans and banks would be willing to do that type of business.  But the banks have not started making loans or helping businesses with the credit they need, and they are also not lending to consumers, the money is being wasted taking care of balance sheet issues at the institutions.

I don't think it has anything to do with Republicans/Dems.  It has to do with the banks not helping main street.

The Government wants the banks to lend money to get the economy going, and since they aren't the government will find another way to get the money to businesses and consumers.  There is a real danger we could fall into a full-scale depression, and no government wants that.  If banks get in the way of the governments ability to influence the economy, they will loose.

jemagee

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Re: Financial Folks - WHat's it Mean
« Reply #3 on: November 13, 2008, 05:59:17 PM »
That doesn't answer the question regarding the original allocation of the money - did congress give treasury 700 billion carte blanche - spend it how you want - or did they have instruction on where and how to spend it? 

Offline westkoast

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Re: Financial Folks - WHat's it Mean
« Reply #4 on: November 13, 2008, 06:03:18 PM »
That doesn't answer the question regarding the original allocation of the money - did congress give treasury 700 billion carte blanche - spend it how you want - or did they have instruction on where and how to spend it? 

And why is the dramatic shift going (or suppose) to help more then what was originally planned?
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Offline rickortreat

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Re: Financial Folks - WHat's it Mean
« Reply #5 on: November 14, 2008, 12:16:35 PM »
The Fed and Treasury could see what was happening in the markets and went to Congress to get the money.  They didn't know exactly what they were going to do, or what would work to solve the problems, but they knew it was going to take a lot of money to fix it.

No one is talking about the real problem, which is the derivative contracts that have to be paid, based on certain occurrences in the markets.  The investment banks are terrified that the contacts they have will not be paid, and they don't trust anyone to give them their money back.  They are also terrified by the contracts they have written which may cause them to pay.

There is no mathematical solution to this problem, and throwing money at it blindly won't help either. Ultimately, the only way to deal with that mess is politically. Meaning that the contracts will have to be declared null and void, with some consideration being given to both parties. This is going to be a massive headache for the legal system, but if it isn't done, the system will probably hyperinflate.

In the meantime, different groups are presenting different plans which address their specific sector.  For example the treasury has control over the money, but the FDIC wants to use some of that $700 billion to help home-owners subject to foreclosure.  They get the borrower and lender together and re-work the mortgage so the owner can stay in the home at a lower payment. The lender looses, but avoids the home going into foreclosure and suffering a major loss. This also gets the Mortgage insurer off the hook to pay off the house, which will alleviate some of the pressure from those derivative contracts.

What is amazing to me is that there isn't more of a specific plan or direction.  This money should come with strings attached, meaning no money for bonuses if your co. is getting assistance.  Any private companies supported should have to commit assets in case of default. Not all businesses should necessarily be saved either. GM is bankrupt because they built a lot of hummers they couldn't sell, instead of gas-efficient cars. Should the taxpayer be forced to subsidize incompetance?  Maybe one of the strings should be the guy who made the decision to build all those gas guzzlers gets fired, along with the one who decided not to import their 70 mpg diesel engine for use in the US.

Offline Derek Bodner

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Re: Financial Folks - WHat's it Mean
« Reply #6 on: November 14, 2008, 12:22:57 PM »
Quote
Maybe one of the strings should be the guy who made the decision to build all those gas guzzlers gets fired, along with the one who decided not to import their 70 mpg diesel engine for use in the US.

Wouldn't that be a little hypocritical, considering the diesel laws in California?

It's also of note that the $25 billion the US government has already agreed to give auto manufacturers to help fund fuel-efficient cars hasn't been dispersed, and is currently being help up by the department of energy.
« Last Edit: November 14, 2008, 02:09:29 PM by Derek Bodner »

Offline rickortreat

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Re: Financial Folks - WHat's it Mean
« Reply #7 on: November 14, 2008, 02:51:31 PM »
Only Californians would be!  Seriously, this is the problem with governments and regulation, they can make laws without knowing the facts or understanding the implications of their decisions.

Diesel technology has changed rapidly, and is being used extensively in Europe.  Diesel is a much lower grade fuel than gasoline, easier to refine.  It only costs more here because the US taxes it highly- as a means of targeting trucks, which do a lot of physical damage to highways.


The new fuel-rail technology makes diesel a better choice for cars than it used to be.  Highly efficient, and low polluting, and less costly for the refineries to produce.

By the way, the actual cost of the fuel is a lot less,  the heating oil used to heat your home (if you use oil heat) is actually diesel.  It is dyed to prevent you from siphoning it out of your tank to fuel your diesel car, which is of course illegal. The government doesn't want to give up tax revenue, even as it wants to make it affordable for people to heat their homes.

Offline westkoast

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Re: Financial Folks - WHat's it Mean
« Reply #8 on: November 14, 2008, 02:58:17 PM »
Only Californians would be!  Seriously, this is the problem with governments and regulation, they can make laws without knowing the facts or understanding the implications of their decisions.



For being mr. big picture you fail to realize that the second largest port in this country resides in Southern California....

You know all the goods from China that various companies in this country depend on come in through the Long Beach/LA port and most of the cargo leaves via diesel trucks (and some on rail).

So you are wrong, it's more then just Californians who are effected by it.
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jemagee

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Re: Financial Folks - WHat's it Mean
« Reply #9 on: November 14, 2008, 03:28:24 PM »
I thought long beach was the largest/busiest port in the country...it's not?



Offline westkoast

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Re: Financial Folks - WHat's it Mean
« Reply #10 on: November 14, 2008, 03:32:50 PM »
I thought long beach was the largest/busiest port in the country...it's not?




I believe Houston is though I could be wrong.
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Offline rickortreat

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Re: Financial Folks - WHat's it Mean
« Reply #11 on: November 14, 2008, 04:28:25 PM »
Only Californians would be!  Seriously, this is the problem with governments and regulation, they can make laws without knowing the facts or understanding the implications of their decisions.



For being mr. big picture you fail to realize that the second largest port in this country resides in Southern California....

You know all the goods from China that various companies in this country depend on come in through the Long Beach/LA port and most of the cargo leaves via diesel trucks (and some on rail).

So you are wrong, it's more then just Californians who are effected by it.

No, you are wrong, because the law was written in California and only applies to it!  The US would not be hypocritical in demanding the dismissal of an auto exec. who decided to not introduce a technology they spent money on to develop that would make diesel cars more fuel efficent, and less polluting.  But California on the other hand...


jemagee

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Re: Financial Folks - WHat's it Mean
« Reply #12 on: November 14, 2008, 04:50:09 PM »
Quote
The US would not be hypocritical in demanding the dismissal of an auto exec. who decided to not introduce a technology they spent money on to develop that would make diesel cars more fuel efficent, and less pollutin

have you seen who killed the electric car rick?  Or are you just pretty naive about how government and big business work?

Offline westkoast

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Re: Financial Folks - WHat's it Mean
« Reply #13 on: November 14, 2008, 05:01:08 PM »
Only Californians would be!  Seriously, this is the problem with governments and regulation, they can make laws without knowing the facts or understanding the implications of their decisions.



For being mr. big picture you fail to realize that the second largest port in this country resides in Southern California....

You know all the goods from China that various companies in this country depend on come in through the Long Beach/LA port and most of the cargo leaves via diesel trucks (and some on rail).

So you are wrong, it's more then just Californians who are effected by it.

No, you are wrong, because the law was written in California and only applies to it!  The US would not be hypocritical in demanding the dismissal of an auto exec. who decided to not introduce a technology they spent money on to develop that would make diesel cars more fuel efficent, and less polluting.  But California on the other hand...



No I am not wrong.  Mr. Economics this should be VERY SIMPLE for you to understand with your supreme knowledge of all things money in this country.  The local truckers fill up diesel here when they are at the port.  All the trucks fill up at the point they start from or at their local yards.  So smart guy, what does that tell you?  It effects the bottom line of the product because of the cost to move it.  Considering they HAVE to fill up locally in California that cost is passed onto the consumer like everything else.

And before you start talking about California because you are biter about losing the finals almost 10 years ago....The Port Of Long Beach has a Clean Truck Program that they mandated to not only get rid of older trucks but to help purchase newer, cleaner burning diesel trucks.   The problem is you don't just snap your fingers and make it so.  Again, your supreme knowledge of business and economy should keep me from having to explain why it is not so simple.  If you would really like to get into it I have no problem pointing out many reasons why there is no 'Genie-Effect' here.

Sorry Rick, as usual, you think a little too highly of your opinion and assume since you think it sounds right that it is in fact right.  You shouldn't argue me on this one.  For the first half of this year I was staffed on a project at the Port Of Long Beach so I know a lot about what goes on there in terms of trucks, trying to clean up the pollution, costs associated with trucks, and everything else under the sun.
« Last Edit: November 14, 2008, 05:08:20 PM by westkoast »
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Offline WayOutWest

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Re: Financial Folks - WHat's it Mean
« Reply #14 on: November 14, 2008, 09:52:21 PM »
I thought long beach was the largest/busiest port in the country...it's not?




Port of Los Angeles is the biggest in the US, 7th in the world I think.
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