Why not a credit card debt bailout?

[jpillian]

Current American credit card debt stands at around $1 Trillion.

(source: http://www.nytimes.com/2008/01/12/business/12charts.html?_r=1&ref=business&oref=slogin)

Now the idea of bailing out irresponsible consumer spending seems absolutely asinine to me. However, it certainly would have more of a "main street" effect than the proposed bailout. Similarly to the proposed Wall Street bailout, every taxpayer would pay for it, but not every tax payer would benefit.

What's the difference?

[G-Prime]

Single individuals don't employ thousands of people and aren't responsible for the savings, spending, cash flow, mortgages and a million other things of millions of other people

[DirtyBird]

I have NO credit card debt. I don't like this plan.

[jpillian]

I have NO credit card debt. I don't like this plan.

I have no sub-prime mortgages either.

[jpillian]

Single individuals don't employ thousands of people and aren't responsible for the savings, spending, cash flow, mortgages and a million other things of millions of other people

I thought consumers were kind of a big deal in our economy?

Edit: BTW -- I do agree with what you're saying to an extent; I'm just not sure how much the current Wall Street Bailout decision is being driven by the effect its intended recipients will have on the economy vs. the amount of influence said recipients have in legislation. My growing cynical side is convincing me it's more and more the latter.

[AsburySkinsFan]

Single individuals don't employ thousands of people and aren't responsible for the savings, spending, cash flow, mortgages and a million other things of millions of other people

Plus as long as we are paying our credit card bills then we are providing the companies with profit, that and I do not believe that credit card debt is sold to other companies as securities like the mortgage backed securities are. From what I understand these are the securities that the banks heavily invested in over the past decade or so, but now none of the banks want to buy these due to the percentage of sub-prime loans that are included in these securities. And when these stop being sold then the cash flow stops, and when the cash flow stops then the big banks who are invested in these securities fail, and when they fail they create a huge crater in the economic landscape.

From my understanding a majority of the 700 billion will be used to buy up these mortgage backed securities, and hopefully for pennies on the dollar, for even if they have a percentage of sub-prime loans in them they will still be dominated by standard loans that are still receiving payments, as such those profits that would have gone to the banks from these securities will now go to the Fed. I think that's how it works...someone correct me if I'm wrong.

[dockeryfan]

Believe it or not, credit card debt is on the table. These banks are exposed to credit card debt, so part of the proposal is to include this debt as well as the debt exposure due to mortgages and mortgage backed securities.

The banks would be able to get this debt off their hands.

Of course, the individuals with the credit card debt? Not so lucky. They still have to pay it back 100%.

Sound fair?

Also wanting to be included is student loan debt.

Now, tell me how this helps the economy. Tell me how this helps main street?

The thinking is that with this stuff off the balance sheets, credit will be freed up to lend to people/businesses/other banks etc.

You don't need to overpay investment banks for their worthless mortgage backed securities to get them back in the black in order to free up credit. But that is what we are being told by Paulson. It is a lie to the American people. Ugh.

This bailout is a bad idea. It seems like I'm the only one realizing this sometimes. Let the investment banks fail. Establish new government backed lines of credit that will directly benefit individuals, small businesses, and big business alike. And it won't cost 700 billion. It will only cost a fraction of that anount.

[hockeysc23]

Please let me know so I can start racking up credit card debt.

Getting a mortgage I can afford, as well as not having a dime of credit card debt is not appealing to me anymore.

I can be irresponsible get what I want and someone else will pick up the bill. Thats what I need to do.

[HOF44]

I do not believe that credit card debt is sold to other companies as securities like the mortgage backed securities are.

Hey could this be the next big thing??? Securities made up of credit card debt.

[panel]

Single individuals don't employ thousands of people and aren't responsible for the savings, spending, cash flow, mortgages and a million other things of millions of other people

Yes they do, their noney is what funds those jobs at the companies that profit from their irresponsable purchases.

[AsburySkinsFan]

I don't like this bail-out package because we are not buying the banks like we did with Fannie and Freddie, if they want the money then we should be profiting as they soon will.

[PleaseBlitz]

So basically, we would take credit card debt, call it taxes, and pay it that way? Either way, the money still comes from somewhere. In this case it would just be spreading it out amongst people that both HAVE and DONT HAVE debt. That doesnt seem right.

[AsburySkinsFan]

Hey could this be the next big thing??? Securities made up of credit card debt.

You're right, but the issue in this instance because it is not the credit card securities are not the one's that aren't selling, instead its the mortgage backed securities. However you may be right in that the credit card securities may be next. The worst part of this is that the consumer doesn't get cut any slack for making the same investmet bet that the major banks did.

[LegionOfDoom]

I guess if I made a sound financial decision and it turned later to be a bad move than I magine I would be told to suck up and move on.

I just don't like the fact that I must help these companies out. They knew the risk in what they were doing but continued down their path. They knew if the crap hit the fan that the Feds would intervene.

[HOF44]

They knew the risk in what they were doing but continued down their path. They knew if the crap hit the fan that the Feds would intervene.

Now that not only they know it, but everyone else does, how do you think it will effect their behaviour in the future? Knowing you have a back stop sure doesn't seem like it would curtail them from taking more risky actions.

[AsburySkinsFan]

Now that not only they know it, but everyone else does, how do you think it will effect their behaviour in the future? Knowing you have a back stop sure doesn't seem like it would curtail them from taking more risky actions.

See, but here's the bigger problem, its not like this is you or me going out and investing a couple thousand, or even a couple million into a failed investment...the market could easily absorb that type of loss, we are literally talking about hundreds of billions of dollars, some market analysts have said "these companies have gotten so big that we cannot afford for them to fail". When they were speaking about Fannie and Freddie the idea of them going belly up was the equivalent of a G8 nation's economy disappearing from the map. Fannie and Freddie combined for over a 5 trillion dollar impact on the economy by themselves, that is more than most nations removing them from the picture and removing these other banks simply cannot be allowed if we are going to avoid a major world recession. Does it suck, sure it does. Will it suck worse if it doesn't happen, you betcha.

Personal note: I find it interesting that once the principles of capitalism have failed then even the most staunch capitalists turn into socialists.

[G-Prime]

I thought consumers were kind of a big deal in our economy?

Edit: BTW -- I do agree with what you're saying to an extent; I'm just not sure how much the current Wall Street Bailout decision is being driven by the effect its intended recipients will have on the economy vs. the amount of influence said recipients have in legislation. My growing cynical side is convincing me it's more and more the latter.

I think a credit card bailout would ultimately be a big thing and would help a lot of people.. just the single citizen doesn't have the pull a bank does =(.. Money buys government

[HOF44]

removing them from the picture and removing these other banks simply cannot be allowed if we are going to avoid a major world recession. Does it suck, sure it does. Will it suck worse if it doesn't happen, you betcha.

Personal note: I find it interesting that once the principles of capitalism have failed then even the most staunch capitalists turn into socialists.

Just to throw this out, but why allow entities to reach this size if by their singular failure economies can collapse. A little regulation and merger control could be in order.

Pure capitalism with no regulation or control will end up with monopolies and ultra concentrated wealth.

[jpillian]

Just to reiterate, I hope no one thinks that I'm saying that some for of a credit card bailout would be a good thing for the American taxpayer to fund. It seems like a completely idiotic thing.

The point of the thread is merely to elicit opinions on what I think is an interesting comparison.

[AsburySkinsFan]

Just to throw this out, but why allow entities to reach this size if by their singular failure economies can collapse. A little regulation and merger control could be in order.

Pure capitalism with no regulation or control will end up with monopolies and ultra concentrated wealth.

I've been saying that same thing for years HOF, but each time I do I'm called a socialist people point to the former Soviet Union. Free Market unregulated Capitalism will do just as you say, and when those companies fail it falls back on the consumers to bail them out. So it was our money that made them rich and its our money that will keep from from going broke. Why do we do it then? Because if we don't the consequences will be far worse.

But, then at the very least we'll get a President out of this that is "more socialist" than we have right now, not perfect but getting there. It's strange though that the word socialist doesn't have nearly the sting that it used to have.

[HOF44]

It's strange though that the word socialist doesn't have nearly the sting that it used to have.

I wonder where everyone screaming socialist commie pinko over regulation and merger control is now that we are undertaking a HUGE socialist project to stabilize our economy. I figure most will be in denial of what is actually happening. :2cents:

[dockeryfan]

some market analysts have said "these companies have gotten so big that we cannot afford for them to fail".

Preposterous. Markets will go up and down, and it is not the job of government to prop up the market.

Not with interest rates like Greenspan would do, and not with bailouts like our President is proposing.

We are being told that "we cannot afford for them to fail" and it is a lie.

Now if they fail, we will have a lack of credit. Yes. Then it starts to affect everybody, because you can't get a loan for a car, or a house, or to cover your payroll, or whatever.

But solutions for credit DO NOT have to involve helping these companies recoup the losses they took when these mortgage backed securities became worthless.

The gov't is capable of establishing lines of credit by themselves. They don't need Wall street to do that.

[SkinsHokieFan]

I wonder where everyone screaming socialist commie pinko over regulation and merger control is now that we are undertaking a HUGE socialist project to stabilize our economy. I figure most will be in denial of what is actually happening. :2cents:

Right here.

Just not in denial. In fact, way too aware

[HOF44]

Right here.

Just not in denial. In fact, way too aware

Has this happening changed your opinions on regulation, merger, and monopoly controls?

[AsburySkinsFan]

I wonder where everyone screaming socialist commie pinko over regulation and merger control is now that we are undertaking a HUGE socialist project to stabilize our economy. I figure most will be in denial of what is actually happening. :2cents:

Hiding because they are still hoping that capitalism will produce some other fruit than what is now being harvested. I still think its ironically fitting that its a Republican in the White House that is proposing the biggest socialist rescue that our country has ever known, and you know full well that if a Democrat had been in the White House proposing this the GOPers would be screaming at the top of their collective lungs...I guess we'll just have to wait and see if socialism can bail out the capitalists.