What do you think of GM's "thank you" ad?

NolaMan said:

Absolutes work, if you let them... just because you don't want to deal with the pain of a true recovery does not mean it was not the better option. It is a simple point...when companies cannot compete.. they need to fail... not get bailed.

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Yes. We should have let all our major financial corporations along with our automotive industry all collapse. First of, our unemployment would be a hell of a lot higher then 9.5%. Next, no one would have any trust in the remaining banks, and they would fail soon too. Overseas, it'd be the same thing. The world economy would collapse, millions upon millions of people will be unemployed, and our governments won't be able to support them. Any person to honestly want that is either insane, or a sane fool.

This would have been several times worse than the Great Depression, and we wouldn't have a world war to save us. We'd be screwing ourselves for generations to come.

repeter said:

Yes. We should have let all our major financial corporations along with our automotive industry all collapse. First of, our unemployment would be a hell of a lot higher then 9.5%. Next, no one would have any trust in the remaining banks, and they would fail soon too. Overseas, it'd be the same thing. The world economy would collapse, millions upon millions of people will be unemployed, and our governments won't be able to support them. Any person to honestly want that is either insane, or a sane fool.

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You assume all major financial institutions would have failed... that is simply not accurate. You assume all car companies would have failed.. that again is not true. What would happen is the banks that survived would boom, the car companies that survived would boom, because they were managed soundly. New companies would be started to take their place and meet the demand. In terms of unemployment, would it be difficult for awhile if these companies failed? Yes. Had GM (for example) gone bankrupt it would have put a lot of people out of work.. it is the same for any large company.

However, the idea that we will go around bailing out company after company because it might "hurt the unemployment numbers if they fail" is patently absurd... regardless of the scope. As it stands, all we are doing it creating new economic bubbles and trying to kick the problems down the road.. that is no solution.

NolaMan said:

You assume all major financial institutions would have failed... that is simply not accurate. You assume all car companies would have failed.. that again is not true. What would happen is the banks that survived would boom, the car companies that survived would boom, because they were managed soundly. New companies would be started to take their place and meet the demand. In terms of unemployment, would it be difficult for awhile if these companies failed? Yes. Had GM (for example) gone bankrupt it would have put a lot of people out of work.. it is the same for any large company.

However, the idea that we will go around bailing out company after company because it might "hurt the unemployment numbers if they fail" is patently absurd... regardless of the scope.

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Again, you're not taking into account the numbers. A lot of banks would fail. Most of our big car companies would fail. Yeah, we would have a few left. Its not about what we'd have, its about what we'd lose. We'd lose far too much for it to be a practical option. In a theoretical execercise where what happens doesn't matter, sure, let them fail. When you're talking about real people, real wealth, and real companies, the facts change.

And you seem to have trouble with moderation of different principles. We should have a free market with some regulations. We should prevent out massive collapses. What we shouldn't do is make an absolute statement and then stick with it.

By the way, could you give me an example where absolutes actually worked?

NolaMan said:

You assume all major financial institutions would have failed... that is simply not accurate. You assume all car companies would have failed.. that again is not true. What would happen is the banks that survived would boom, the car companies that survived would boom, because they were managed soundly. New companies would be started to take their place and meet the demand. In terms of unemployment, would it be difficult for awhile if these companies failed? Yes. Had GM (for example) gone bankrupt it would have put a lot of people out of work.. it is the same for any large company.

However, the idea that we will go around bailing out company after company because it might "hurt the unemployment numbers if they fail" is patently absurd... regardless of the scope. As it stands, all we are doing it creating new economic bubbles and trying to kick the problems down the road.. that is no solution.

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Which finanicial institutions would have survived with out the AIG bailout, the fannie and freddie bailout and Tarp? Given the interconnected nature of the financial industry, each of the major institutions would have been wiped out with the various bailouts.

Lord Tammerlain said:

Which finanicial institutions would have survived with out the AIG bailout, the fannie and freddie bailout and Tarp? Given the interconnected nature of the financial industry, each of the major institutions would have been wiped out with the various bailouts.

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Numerous banks refused to take bailout money...some were forced to take bailout under the TARP plan as well that did not want it. Saigon National, based in the Orange County, California took it but did not want it (they stated it was cheap money, so why not take it), Frost bank, based in San Antonio, refused to take any bailout money. If the major financial institutions failed, it would have opened the door for well run large regional banks that did not take (or need) bailout money to step up and take their place.

There are a lot of regional banks that fit into this category... well run banks that protected themselves against problems like this and got screwed over for having good management.

Commerce Bancshares said no, New York Community Bancorp said no, BancorpSouth Inc said no, Hudson City Bancorp, Tulsa-based BOK Financial, and People's United Financial all said no.

NolaMan said:

Numerous banks refused to take bailout money...some were forced to take bailout under the TARP plan as well that did not want it. Saigon National, based in the Orange County, California took it but did not want it (they stated it was cheap money, so why not take it), Frost bank, based in San Antonio, refused to take any bailout money. If the major financial institutions failed, it would have opened the door for well run large regional banks that did not take (or need) bailout money to step up and take their place.

There are a lot of regional banks that fit into this category... well run banks that protected themselves against problems like this and got screwed over for having good management.

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Not what I was refering to

When a financial institution fails, its debts and obligations to other institutions (including CDO and other similar investments) also fail.

When AIG failed the US government ended up giving around 80 billion to financial institutions. Along that money along with TARP did prevent other institutions from failing, which if they had failed would have seen plenty of other institutions failing. A cascade effect

repeter said:

Again, you're not taking into account the numbers. A lot of banks would fail. Most of our big car companies would fail. Yeah, we would have a few left. Its not about what we'd have, its about what we'd lose. We'd lose far too much for it to be a practical option. In a theoretical execercise where what happens doesn't matter, sure, let them fail. When you're talking about real people, real wealth, and real companies, the facts change.

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That is how capitalism works... I understand that it would effect people, and I feel badly for them, but that does not change the point that saving companies who have no business being in business anymore to "help people" is absurd.

And you seem to have trouble with moderation of different principles. We should have a free market with some regulations. We should prevent out massive collapses. What we shouldn't do is make an absolute statement and then stick with it.

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I agree there can be some regulations, but preventing collapses has no place in our economic system in my opinion.

By the way, could you give me an example where absolutes actually worked?

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This is an unfair question since governments always ride in and never allow the market to work as it should.

Lord Tammerlain said:

Not what I was refering to

When a financial institution fails, its debts and obligations to other institutions (including CDO and other similar investments) also fail.

When AIG failed the US government ended up giving around 80 billion to financial institutions. Along that money along with TARP did prevent other institutions from failing, which if they had failed would have seen plenty of other institutions failing. A cascade effect

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So if one company fails, our entire system collapses is your assertion here? If that is accurate, it sounds as if the system needs to fail and be rebuilt from the ground up...

NolaMan said:

So if one company fails, our entire system collapses is your assertion here? If that is accurate, it sounds as if the system needs to fail and be rebuilt from the ground up...

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Not if one fails no of course not, but if many do in a short perriod of time yes.

If 3 of the big 5 Canadian banks all failed at with a year the Canadian economy would collapse, if one did, it wouldnt as the other 4 could take over the assets and keep on running

Lord Tammerlain said:

Not if one fails no of course not, but if many do in a short perriod of time yes.

If 3 of the big 5 Canadian banks all failed at with a year the Canadian economy would collapse, if one did, it wouldnt as the other 4 could take over the assets and keep on running

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Do you know of any study that did a breakdown of what bailed out banks owed to other banks, and those banks capitalizations etc, to actually prove that if banks were not bailed all other institutions would have followed in failure?

I get tired of the argument of "If we did not bail them out, then god knows what would have happened." (Not that you made that persay, but you get my point)

NolaMan said:

That is how capitalism works... I understand that it would effect people, and I feel badly for them, but that does not change the point that saving companies who have no business being in business anymore to "help people" is absurd.
I agree there can be some regulations, but preventing collapses has no place in our economic system in my opinion.

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Then agree to disagree?

NolaMan said:

This is an unfair question since governments always ride in and never allow the market to work as it should.

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It doesn't have to be in economics. I was making a broad statement, that life is based on compromises and moderate views work better than absolute views.

repeter said:

Then agree to disagree?

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Works for me. I always enjoy a good back and forth. :wink:

It doesn't have to be in economics. I was making a broad statement, that life is based on compromises and moderate views work better than absolute views.

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The Earth revolves around the sun.

NolaMan said:

Do you know of any study that did a breakdown of what bailed out banks owed to other banks, and those banks capitalizations etc, to actually prove that if banks were not bailed all other institutions would have followed in failure?

I get tired of the argument of "If we did not bail them out, then god knows what would have happened." (Not that you made that persay, but you get my point)

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Ju
It is not just what was owed to other banks but Credit Default Obligations. Imagine if Goldman put out $30 billion on a Citi default, a $30 billion dollar loss would have wiped out goldman. Just as a Greek default would wipe out major german banks. The main issue is that leverage in the US and most countries has been allowed to grow to massive levels, making even small loss's a potential crisis.

At a 1 to 10 leverage things would not have been bad, but at 1 to 30 or 40 then things do get very bad very quickly. And yes the US system did and does need to be overhauled, the recent reformation is no where near enough

Lord Tammerlain said:

Ju
It is not just what was owed to other banks but Credit Default Obligations. Imagine if Goldman put out $30 billion on a Citi default, a $30 billion dollar loss would have wiped out goldman. Just as a Greek default would wipe out major german banks. The main issue is that leverage in the US and most countries has been allowed to grow to massive levels, making even small loss's a potential crisis.

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I will admit I am not 100% sure how Credit Default Obligations function.. that said, were those issued by banks of their own free will? If so, it seems they took a risk and lost.

At a 1 to 10 leverage things would not have been bad, but at 1 to 30 or 40 then things do get very bad very quickly. And yes the US system did and does need to be overhauled, the recent reformation is no where near enough

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How are we ever going to overhaul anything if banks are allowed to continue to make bad bets knowing it won't ultimately matter if they take a big enough bad bet?

cpwill said:

:roll:

Here. this is a full-page ad taken out by literally hundreds of equally notable economists who came together to say that Krugman's claim that the porkulus was necessary to avoid a depression was bunk (not specifically attacking him; just that claim).

so Krugman is alone in his views?


that's the problem with appealing to a single authority in a contentious issue; there are bound to be others who disagree.


NOW


are you willing to stand up and attempt to defend the ridiculous claim that somehow our economy was saved by the GM bailout, or that the massive removal of investment capital via the "stimulus" somehow magically helped the economy?

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so Krugman is standing alone in his views and nobody else agrees with this position?

I could not help but notice the ECONOMIST magazine, who opposed the help for the auto industry, has now issued an apology to the President and said it worked.

haymarket said:

so Krugman is standing alone in his views and nobody else agrees with this position?

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I think the point is that Krugman represents one side of an issue with many sides, and is by no means the definative voice on the matter.

haymarket said:

so Krugman is standing alone in his views and nobody else agrees with this position?

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no, other keyensians generally agree with the notion of deficit stimulus. they then tend to break into camps over whether this is best done through spending or tax cuts. if you had actually bothered to read the research i gave you earlier, you would have noted that.

but it's not enough to say "look, here is a person of note in the econmic school i support". I could (if i wanted to) just as easily put up milton friedman, cite Hayek, or any of the other noted economists who disagreed with Keyenes and would likely disagree with Krugman. (of note, even keynes would have likely disagreed with Krugman, though over the issue of scale; Keynes argued that government spending over 25% of GDP was damaging; we are at that line now and Krugman is urging us to surge past it in the magical theory that even more debt will somehow equal even more wealth. some people really can't get their heads around accrual accounting.)



but i retain my point; given that the economists were sharply divided; would you mind providing some kind of evidence that bailing out GM saved us from depression? in particular i would like to hear any particular reasons why this bankruptcy would have been somehow different from other corporate bankruptcies; in the claims that GM would have for some reason stopped producing automobiles.

NolaMan said:

I will admit I am not 100% sure how Credit Default Obligations function.. that said, were those issued by banks of their own free will? If so, it seems they took a risk and lost.



How are we ever going to overhaul anything if banks are allowed to continue to make bad bets knowing it won't ultimately matter if they take a big enough bad bet?

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i agree with you here

I would not have forced any bank to take TARP money or get a bailout. But any that did, I would have wanted the shareholders to be wiped out and have bond holders and depositers take hits according to the loss`s the institution suffered

NolaMan said:

I will admit I am not 100% sure how Credit Default Obligations function.. that said, were those issued by banks of their own free will? If so, it seems they took a risk and lost.



How are we ever going to overhaul anything if banks are allowed to continue to make bad bets knowing it won't ultimately matter if they take a big enough bad bet?

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Credit default swap - Wikipedia, the free encyclopedia

Basically a CDS is a bet either for or against a default on debts

I could purchase from Goldman a few billion dollars worth of CDS if GM defaulted on its credit obligations. I would have to pay Goldman a certain amount of money per month or year depending on the length of the contract. Normally most people would use a CDS as a hedge if their investment does default, but you could purchase a CDS on the potential of GM defaulting without owning any GM debt. They were issued by their own free will, and were issued in the hundreds of billions of dollars. LehmanBrothers going under and the CDS`s issued by AIG was a primary cause of its faluire

I had mixed response to it originally but now I say what I originally said- screw GM they make crappy cars that aren't ahead in anyway of their far superior American counterparts of Toyota and Honda, and they make nearly as much if not more of their money in China which I am strongly against. They should have fallen, their brands sold to others (which would have encouraged competition) and it would have put jobs in my area (where Honda and Toyota is prevalent). I say boo and btw they didn't actually pay the entire loan, just what the government asked for back, yet the government threatens me about my student loans. You ****ing serious? You can give them billions and forgive over half of it as that wasn't the actual "loan" but you can't forgive me on any of my loans? Go **** yourself government.