I have no specific replies to add, so I'll just cross-post what I've already written elsewhere.

(Cross-posting from another forum)

The bill title was "To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes"

Even those in favor of the bill couldn't get themselves to actually title it properly. Cue next election, where we'll see politicians arguing that they were voting for tax reductions on firemen, national guardsmen, etc!

(Cross-posting from another forum)

>>could you please come up with specific pieces of regulation that supposedly have triggered this crisis

Sure. I'll give you 4 of the prominant ones. There are plenty of other, more minor ones.

1. The Federal Reserve Act of 1913 is the prime piece of legislation involved. When interest rates are held artificially low, it does create a bubble in assests that are were comparatively undervalued. When interest rates are below market rates, does that make it more or less likely for loans to be taken and malinvested? Does guaranteeing banks against runs make them unnecessarily loan out more or less of their deposits?

2. The Glass-Steagal Act of 1933, among other things, creates the FDIC, which guarantees depositor money against risk taken by banks. Does that make banks more or less likely to take unnecessary risks?

3. 1975 creation of NRSRO and special priviledges given to them by the SEC. NRSRO gives a government stamp of approval to certain ratings agencies. This pretty much killed off all competitors. Moreover, federal regulations require sellers of securities to have their securities rated. Conflict of interest much? If you can shop around for raters, why wouldn't you pay the agency that rates your securities highest?

4. Creation of FNMA and FHLMC. Even though they were spun-off as private corporations in 1968, they enjoyed implicit government backing. This allowed them to get funding at 10 to 20 basis points below LIBOR and thus ~40 basis points above US Treasuries. In other words, the implicit guarantee allowed them to be treated as "almost as safe as the US government".

Various tax advantages, more direct subsidies and SEC preferrential treatment have allowed FNMA and FHLMC to out-compete private investments. Moreover, they served as a (taxpayer-backed) dumping ground for questionable MBSs and other toxic waste.

Let's also ignore the FNMA accounting scandal from 2004, where it became clear that FNMA didn't even know what it was buying and holding on to.

(More cross-posting from another forum)

The point is that the crisis would never have been so big if it was not for the government; the free market has plenty of negative feedback loops to prevent that from happening.

Remember the housing bubble of 1925? Yeah, me neither.

Here applies the concept of "too big to bankrupt". It is just impossible. Down here, our privatized airlines were a mess, and the Congress had two plans: get in charge of it, or let it go bankrupt and found a new national airline. The officialism won, and so we absorbed a company that has 25 planes and over 900 pilots (yes, almost 36 pilots per available plane).

Also, the more merges there are, the most consolidated the market becomes, and the higher chance of a monopoly or a oligopoly to develop in such market.

I am happy the bail out failed.

It was a horrible bill.

If the Dems would quit putting crap into something that should be simple we would not wind up with a 106 page document.

95 dems did not vote for it and 131 Republicans did not vote for it. It looks like a nice hunk of Dems knew this was a big hunk of crap to vote on. It takes a woman like Pelosi to completely screw things up.

Fannie and Freddie enabled the Dems to create a situation were the normal signals of capitalism would not work. This situation was caused by regulation or it could be called government force since thats the entity that dictated banks to loan to bad risk individuals. Warnings were given about statements like "we will no longer let things like bad credit ratings or lack of full employement be a reason to not make someone a loan" This was an actual statement from these guys.

I just bought in for another 20k short term investment (401k mutual funds) just before the markets closed today. I am banking on a decent bill getting passed soon which will make the markets shoot right back up. If not I am still ahead of the game. They will pass something however. This is some of the easiest money I have ever made.

@ Frank G: I forgot to mention how much I love your new title.

Isn't it fascinating how it happens to be the other party's fault in the failure of this bill?

I agree with Bob that it's mainly due to artificial meddling with the markets. I saw a similar argument in favor of very minimal government at all; the question was, who will reign in the big corporations? The answer: Big corporations couldn't exist if not for government meddling, so get rid of government and you'll get rid of the corporations. It works either way.

Who wants to save the world when it will put you against your country?

By the way, as Chilean president said at the UN, with USD700km you can end worldwide famine and poverty.

1/3 of the Democrats voted against it.
2/3 of the Republicans voted against it.

Lack of leadership? Before the vote, the average American didn't want it to be passed. I call it listening to the people who elected you. Of course after the markets dropped, people freak out and change their minds about it.

It's humorous to blame either side when neither side supported it. You have Bush-McCain, Inc. pushing for it, but 2/3's of the Republicans vote against it. Lack of leadership on their part, for sure.

I found this amusing (old as it may be)

"Now you're saying its a horrible bill? AND you're agreeing with the evil Liberals? What happened to your staunch support of the bill?"

What in the heck are you talking about? You make no sense at all.

Let me help poor Thomas again.

1. We should do something to keep the markets from total collapse.

2. We need a constructive bill to help fix the problem.

3. Liberals totally screwed up the bill with crap like ACORN.

4. People with a brain vote against crappy bill.

5. Begin working on a new improved bill.

All of this will not matter if the Democrats cannot come clean and admit that they screwed everything up. If the government continues to force banks to make bad loans we will be right back in this position again. Who here still believes that deregulation caused all of this and explain how!

I see two sides:

1. Those who want to fix the problem by doing with the bailout, applying more regulations, etc.
2. Those who think the market should fix itself

Most Democrats think 1 is the solution. But the bill failed because most Republicans think the market should fix itself, that there should be consolidation and those who did mistakes should go bankrupt. The problem is not who or when started it, but how to solve it. This is where Bush fumbles, because he wants to fix the problem the way Democrats would do. It cannot be simpler.

I kind of understand that. But I also understand that life in US is different from here: down here, without cash you cannot live. If you want to buy something, you buy it in cash. In US, you live with credits. Getting into debts to buy or pay something is natural not only for people but for organizations. So, how can a system survive when it uses "promises of payment" instead of real money? This crisis only weakens the trust between parts, so credits would naturally become more expensive. But that would only push more people out of the system.

How do you teach people not to take a credit (which must be something as natural as buying a lottery ticket there)? How do you teach them to consider new options when buying something? And this is not even considering those who will suffer in years to come (with retirement funds vaporized, how would those people live once they retire?).

Hehehe, an analyst down here suggested that the big economies in the world (US, Germany, Japan, etc) need all to slash interest at least 1 point to start the path to recovery

Now this is interesting: with higher prices, US would import less stuff, which would only push the price of those commodities down. The barrel was at USD 120 a week ago, now it is at USD 95. So, you put the money there, but without the world engine consuming it won't reflect on the price. The truth is: this would only benefit those with cash, big corporations and rich individuals.

The Bank of Japan already set interest rates to 0.75%. They were even lower in previous years. It didn't help Japan then, and it won't help the US now.