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Are they just taxing the bejeebuz out of the RICH with this one? Because I'm reading that this one has tax CUTS for the middle class thrown in.... How can the screw us for 700b, and yet CUT taxes for the middle class? :confused:

Haven't had my coffee- can't wade through the pork- anyone got the Cliffs Notes handy?
 

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I was wondering about this too. As far as I know, most of the tax cuts are coming from passing the band-aid that they pass every year with the alternative minimum tax. Instead of indexing the cut off limit to inflation which would permanently fix the problem, they choose to do this in case that they need the money some year. That way they can just say that we didn't raise taxes since they were already there.
 

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I thought this was a good question, so I looked up monetary supply... and got this from Wiki, wouldn't ya know it, its about as clear as mud. I guess the Fed buys Treasury notes, and dispenses cash in return. I'm pretty sure its all just sleight of hand however, as no gold or production base is used to determine how much money can be put into circulation.

Monetary policy in the United States is determined and implemented by the United States Federal Reserve System, commonly referred to as the Federal Reserve. Established in 1913 to provide central banking functions,[6] the Federal Reserve System is a quasi-public institution. Ostensibly, the Federal Reserve Banks are 12 private banking corporations;[7][8][9] they are independent in their day-to-day operations, but legislatively accountable to Congress through the auspices of Federal Reserve Board of Governors. The Board of Governors is an independent governmental agency consisting of seven officials and their support staff of over 1800 employees headquartered in Washington, D.C.[10] It is independent in the sense that the Board currently operates without official obligation to accept the requests or advice of any elected official with regard to actions on the money supply,[11] and its methods of funding also preserve independence. The Governors are nominated by the President of the United States, and nominations must be confirmed by the U.S. Senate. The presidents of the Federal Reserve Banks are nominated by each bank's respective Board of Directors, but must also be approved by the Board of Governors of the Federal Reserve. The Chairman of the Federal Reserve Board is generally considered to have the most important position, followed by the president of the Federal Reserve Bank of New York.[12] The Federal Reserve System is primarily funded by interest collected on their portfolio of securities from the US Treasury, and the Fed has broad discretion in drafting its own budget,[13] but, historically, nearly all the interest the Federal Reserve collects is rebated to the government each year.[14]

The Federal Reserve has three main mechanisms for manipulating the money supply. It can buy or sell treasury securities. Selling securities has the effect of reducing the monetary base (because it accepts money in return for purchase of securities), taking that money out of circulation. Purchasing treasury securities increases the monetary base (because it pays out hard currency in exchange for accepting securities). Secondly, the discount rate can be changed. And finally, the Federal Reserve can adjust the reserve requirement, which can affect the money multiplier; the reserve requirement is adjusted only infrequently, and was last adjusted in 1992.[15]

In practice, the Federal Reserve uses open market operations to influence short term interest rates, which is the primary tool of monetary policy. The federal funds rate, for which the Federal Open Markets Committee announces a target on a regular basis, reflects one of the key rates for interbank lending. Open market operations change the supply of reserve balances, and the federal funds rate is sensitive to these operations.[16] In theory, the Federal Reserve has unlimited capacity to influence this rate, and although the federal funds rate is set by banks borrowing and lending funds to each other, the federal funds rate generally stays within a limited range above and below the target (as participants are aware of the Fed's power to influence this rate).

Assuming a closed economy, where foreign capital or trade does not affect the money supply, when interest rates go down, money supply increases. Businesses and consumers have a lower cost of capital and can increase spending and capital improvement projects. This encourages short-term growth. Conversely, when interest rates go up, the money supply falls, increasing the cost of capital and leading to more conservative spending and investment. The Federal reserve increases interest rates to combat inflation.


BTW, From what I have read, almost all of your Federal Income Tax money goes directly to paying the interest on the national debt. All funds for government services, like education and transportation infrastructure, come from other taxes like property taxes and gasoline taxes.

EQV
 

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I think the theory is, the govt acquires the loans at a steep discount, then when the real estate market goes back up, the govt unloads the loans, still well below market value to make it palatable to the financial institutions, but enough to make a profit.

That's right, I said profit. I have heard it said by the finance wizards that the govt actually came out ahead from the S&L bailouts in the 80s.

Of course, if the loans were going to turn around and become profitable, then why wouldn't a bank consortium buy them on spec and sit on them?
 

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I have heard that argument before too about the government profiting from this. The question I wonder about is will that take that profit and pay down the debt they used to borrow in the first place to buy whatever it is they are buying? My guess is that they will just find more creative ways to spend it and we'll still have this 1 trillion+ dollar disaster to deal with.

I think the theory is, the govt acquires the loans at a steep discount, then when the real estate market goes back up, the govt unloads the loans, still well below market value to make it palatable to the financial institutions, but enough to make a profit.

That's right, I said profit. I have heard it said by the finance wizards that the govt actually came out ahead from the S&L bailouts in the 80s.

Of course, if the loans were going to turn around and become profitable, then why wouldn't a bank consortium buy them on spec and sit on them?
 

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I have heard that argument before too about the government profiting from this. The question I wonder about is will that take that profit and pay down the debt they used to borrow in the first place to buy whatever it is they are buying? My guess is that they will just find more creative ways to spend it and we'll still have this 1 trillion+ dollar disaster to deal with.
An excellent question. The first version that failed the house had earmarked 20% of all profits on the deal to go to ACORN, one of Obama's, ahem, "community organizing efforts"...:rolleyes:
 

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Before this bill, the national debt spread between each of the 310 million Americans is just over $34,000. This bill started at $700b and now has increased by $150b in "bribes" to the house representatives and American sheep. This will add another 8.3% of taxpayer debt or $2,822 to each man, women and child. Considering the 30-year treasury bill is going for 4.5% these days.... $36,822 amortized over 30 years is $137,910 per American. This is needed just to service the debt.... now also add in the yearly cost to run our government... other countries will do the math and decide to dump the dollar.
 

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This isnt even the beginning. there is between 960b and 1.08t right now in bad mortgages. Next year just in my metropolitan area there are 31,000 homes set to forclose. In august 07 the average home price here was 300,000. Ill take of 15% just for ****s and giggles even though these peoples loans will still reflect that price last year. So at $255,000 X 31,000= 7.9 billion dollars just in northern utah. Nationwide its about 200b next year.

By this time next year they will be wanting another 500b since they asked for less then what the problem truly is. Truth be told there will be forclosures at this rate until 2010.

The IMF released a study last month on all 42 systemic banking crisis covering 1970-2007. Of the 42 crisis reviewed only in 7 of those did they try to solve the problem the way we are. Nouriel Roubini, noted expert on the subjects at hand, said this about those examples,

"Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico). Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification."

http://www.imf.org/external/pubs/ft/wp/2008/wp08224.pdf
http://tinyurl.com/fedsucks

There is so much wrong with this bill that its terrifying. It will do nothing but make the problem worse. They are trying to slow down the proper way to reach real value in the various markets. They need to focus solely on recapitalization of banks instead of proping up a real estate market that needs to be brought down.
 
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