… has made me wonder if the best solution is some way to manage the market correction to keep it from happening in panic, and more in control.

Not adding any more money to the economy — perhaps taking money OUT of the economy — so that we do not end up with worse inflation than we already have thanks to the housing crisis.

Whatever happens, it’s going to hurt.

Perhaps now we better stop thinking about avoiding what is going to happen, and figure out instead a way to manage it so it happens at least somewhat sanely.

If the Democrats put a lot of pork into the bill (that is also politically unpopular) then the President should utilize a power that many think Presidents already have —the line item veto.

Andy Kessler: The Paulson Plan Will Make Money for Taxpayers

What do you think about this scenario blackhedd?

Nobody cares what we say or think. Congress always needs to deflect the blame of their mistakes and this is no exception.

With the Continuing Resolution, Congress just gave $25 billion to the automobile companies and no one batted an eye. Where is all the bipartisan screaming? Well, since Ohio and Michigan are electorally in play there will be none.

We have proverbial Fannie/Freddie crack addicts Frank and Dodd telling us what is good for the financial markets? Now Obama gets a seat at the table, all in the interest of bipartisanship? Where was that spirit when they glibly killed the President’s and McCain’s reform bills?

Honestly, how about Congress just hands out big “kick me” signs for all the American taxpayers? Oh, sorry mom, I know you said to try and get along.

If one has ever been at the table negotiating large credit agreements, right now you are probably punching the monitor. Just the fine print on this is enough to kill any deal.

Apologies, I need to go see what institutions will become illiquid today while the Democrat led Congress and Obama try to figure out the best political angle on this crisis.

… of a market crash, and I’m seriously wondering if it’s not better than signing onto the “solution” that this bill represents. If you go to my diary on the subject, there’s a link to Jack Welch saying that we’re in for a severe recession no matter what happens. A lot of other experts are saying the same thing.

If that’s the case, what exactly is the upside to passing this bill? How much worse will it be if we simply say, hey, we’ll take the recession?

You’ve pointed to 1929 as an apt comparison to what’s happening now. For the sake of argument, let’s accept that comparison. But the historians don’t generally accept the idea that the Great Depression was a direct result of the Wall Street crash. For one thing, the Depression didn’t really start in earnest until 1931. Moreover, there were a whole lot of other factors contributing to it: saturation in the durable goods market (i.e., cars, radios, etc.), decline in demand for U.S. exports, and even climate change (re: Dust Bowl). So are we really talking about a return to the 1930′s? Or simply the crappiest part of the 1970′s? Because if it’s the later, I’m inclined to say, “no deal.”

If you let the credit markets freeze up and the Libor rate is the first sign that is happening. Expect the dominoes falling to start taking out banks around the world and the USA and the taxpayer will be paying hundreds of Billions since the FDIC fund will run dry very quickly. Also, expect your 401K funds and pension funds to take very large losses that will take several years to recover their original value.

Get out of stocks now while you have a chance, the 1929 depression is just around the corner. Thanks to the GOP led effort to “Kill the Bailout” allot of people or going to loose money and unemployment is going to go up sharply. The largest and one of the oldest auto dealerships in the USA just closed their doors Wednesday. They are just one of many more dominoes that are going to fall, if the House and Senate doesn’t wake up soon.

Hard News:
Liquidity in the money markets in maturities over a week is desperately scarce,” said Tim Bond, head of global asset allocation at Barclays Capital in London. “A near-term solution to the crisis is urgent. Unchecked, the current crisis would turn into a self-reinforcing vortex of defaults, bank capital contraction and deep recession within a matter of weeks.”

Money-market rates signal banks have all but stopped lending to each other. Treasury Secretary Henry Paulson’s bailout plan, which proposes removing tainted assets from bank balance sheets, may be cut back in size, U.S. House Budget Committee Chairman John Spratt said Thursday. The U.S. faces a “painful” recession if the package isn’t approved, President George W. Bush said Wednesday.

“The message coming from our money-market traders is that nothing’s working,” said Padhraic Garvey, the Amsterdam-based head of investment-grade debt strategy at ING Bank. “Banks are not dealing with one another and the situation has gotten worse. The real market is probably about 10 to 20 basis points above where Libor fixings are.”

If you let the credit markets freeze up and the Libor rate is the first sign that is happening. Expect the dominoes falling to start taking out banks around the world and the USA and the taxpayer will be paying hundreds of Billions since the FDIC fund will run dry very quickly. Also, expect your 401K funds and pension funds to take very large losses that will take several years to recover their original value.

Get out of stocks now while you have a chance, the 1929 depression is just around the corner. Thanks to the GOP led effort to “Kill the Bailout” allot of people or going to loose money and unemployment is going to go up sharply. The largest and one of the oldest auto dealerships in the USA just closed their doors Wednesday. They are just one of many more dominoes that are going to fall, if the House and Senate doesn’t wake up soon.

Hard News:
Liquidity in the money markets in maturities over a week is desperately scarce,” said Tim Bond, head of global asset allocation at Barclays Capital in London. “A near-term solution to the crisis is urgent. Unchecked, the current crisis would turn into a self-reinforcing vortex of defaults, bank capital contraction and deep recession within a matter of weeks.”

Money-market rates signal banks have all but stopped lending to each other. Treasury Secretary Henry Paulson’s bailout plan, which proposes removing tainted assets from bank balance sheets, may be cut back in size, U.S. House Budget Committee Chairman John Spratt said Thursday. The U.S. faces a “painful” recession if the package isn’t approved, President George W. Bush said Wednesday.

“The message coming from our money-market traders is that nothing’s working,” said Padhraic Garvey, the Amsterdam-based head of investment-grade debt strategy at ING Bank. “Banks are not dealing with one another and the situation has gotten worse. The real market is probably about 10 to 20 basis points above where Libor fixings are.”

If you let the credit markets freeze up and the Libor rate is the first sign that this is happening. Expect the dominoes falling to start taking out banks around the world and the USA. The US taxpayer will be paying hundreds of Billions since the FDIC fund will run dry very quickly. Also, expect your 401K funds and pension funds to take very large losses that will take several years to recover their original value.

Get out of stocks now while you have a chance, the 1929 depression is just around the corner. Thanks to the GOP led effort to “Kill the Bailout” allot of people or going to loose money and unemployment is going to go up sharply. The largest and one of the oldest auto dealerships in the USA just closed their doors Wednesday. They are just one of many more dominoes that are going to fall, if the House and Senate doesn’t wake up soon.

Hard News:
Liquidity in the money markets in maturities over a week is desperately scarce,” said Tim Bond, head of global asset allocation at Barclays Capital in London. “A near-term solution to the crisis is urgent. Unchecked, the current crisis would turn into a self-reinforcing vortex of defaults, bank capital contraction and deep recession within a matter of weeks.”

Money-market rates signal banks have all but stopped lending to each other. Treasury Secretary Henry Paulson’s bailout plan, which proposes removing tainted assets from bank balance sheets, may be cut back in size, U.S. House Budget Committee Chairman John Spratt said Thursday. The U.S. faces a “painful” recession if the package isn’t approved, President George W. Bush said Wednesday.

“The message coming from our money-market traders is that nothing’s working,” said Padhraic Garvey, the Amsterdam-based head of investment-grade debt strategy at ING Bank. “Banks are not dealing with one another and the situation has gotten worse. The real market is probably about 10 to 20 basis points above where Libor fixings are.”

As some financial experts warned this would happen in September and October 2007. The delay in not acting sweeping changes and bailouts to stop the subprime mortgage crisis from spilling over into all-out financial crisis. Is now catching up with us.

I personally remember Jim Cramer as just one person who said, things had to be done on a broad basis 1-year ago or there would be a melt down of the financial system and allot of people would loose their homes.

Now I read – IndyMac, which had $32 billion in assets when it went into receivership, is the most expensive bank failure the FDIC has ever covered. And that record may not stand for long.

By the end of 2009, about 100 U.S. banks with collective assets of more than $800 billion will fail, predicts Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based firm that sells its analysis of FDIC data to investors.

It's not going to be Armageddon,'' says Mark Vaughan, an economist and assistant vice president for banking supervision and regulation at the Federal Reserve Bank of Richmond, Virginia.But it’s going to be bad.”

The FDIC knows which banks are at risk; it has a watch list with 117 institutions. The agency won’t disclose their names because doing so could cause depositors to panic and pull out all of their funds.

It won’t take many more failures before the FDIC itself runs out of money. The agency had $45.2 billion in its coffers as of June 30, far short of the $200 billion Whalen says it will need to pay claims by the end of next year. The U.S. Treasury will almost certainly come to the rescue.

Regardless of who wins control of the White House and Congress in November, no politician is likely to vote in favor of leaving federally insured depositors out in the cold.

The subprime crisis — which started in the suburbs of California and Florida and migrated through the alchemy of securitization to Wall Street investment banks — has come almost full circle, spreading its toxins to the very lenders who first extended those teaser-rate, no-document mortgages to homeowners.

In 2006, IndyMac was the largest provider of mortgages that didn’t require borrowers to provide proof of their incomes. And as of mid-September, investors were worried that Washington Mutual Inc., the biggest thrift in the U.S., would be the next bank to go belly up.

A federal takeover of Washington Mutual, which has assets of $310 billion, could cost taxpayers $24 billion more, according to Richard Bove, an analyst at Miami-based Ladenburg Thalmann & Co.

Slower To Hit

The reckoning that has run through Wall Street, claiming investment banks Lehman Brothers Holdings Inc. and Bear Stearns among its victims, has been slower to hit Main Street. In mid- 2007, Wall Street firms began disclosing losses on their packages of securitized home loans.

From August 2007 to September 2008, banks worldwide wrote down more than $500 billion. Regional banks, by contrast, have waited to write off their bad mortgages, hoping the housing market would improve and defaults would level off. Instead, they’ve risen.

FDIC-insured banks charged off $26.4 billion of bad loans in the second quarter of 2008, the most since 1991.

People are starting to figure out that this is crisis is caused by the application of the mark-to-market accounting rule and that there are alternatives.

http://www.redstate.com/diaries/jsobieski/2008/sep/25/a-modest-proposal-that-could-save-the-us-go/

…WAMU was seized by the FDIC and parts of its were apparently sold to Chase.

This is a video you should see if you want to understand what caused this crisis…

Burning Down The House: What Caused Our Economic Crisis?

http://www.youtube.com/watch?v=H5tZc8oH–o