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The Bail Out: Interesting article from Time
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Maggie AAR
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PostPosted: Wed Oct 01, 2008 10:50 am    Post subject: The Bail Out: Interesting article from Time Reply with quote

Why Aren't Americans Buying the Bailout?

By AMANDA RIPLEY1 hour, 28 minutes ago

The $700 billion financial bailout package failed because most Americans wanted it to fail. Before the vote, members of Congress were getting calls 100 to 1 against the bill. The question is: why? It's easy to see why bailing out rich bankers doesn't feel super, but why, despite all the efforts of all of the country's leaders to fill them with fear of an economic apocalypse, did Americans not see a failure to act as a serious threat to their livelihoods?

Traditionally, human beings are not great at assessing this kind of risk - a peril that has not yet arrived and that is, in any case, hard to viscerally imagine. Witness people's reluctance to evacuate before hurricanes, and weather forecasts portend a danger far easier to comprehend than failing investment banks.

But there are methods of communicating risk in a way that stills the heart, with words that inject dread into the populace. And Treasury Secretary Henry Paulson Jr., Fed Chairman Ben Bernanke and President George W. Bush used none of them. "The case wasn't made as to why the little guy needs this," says Paul Slovic, author of The Perception of Risk and a psychology professor at the University of Oregon. "The numbers and vague warnings are too abstract."

The most effective warnings are like the most effective TV ads: easily understood, specific, frequently repeated, personal, accurate, and targeted. Paulson and his grim reapers managed only to repeat themselves frequently. They were not easily understood, partly because the problem is so complex. They did not personalize or target their warnings. And, as they themselves admitted, they did not know if their warnings were necessarily accurate, due to the novelty and unpredictability of the crisis.

But their biggest mistake was a lack of specificity. They never clearly told the American people what might happen if Congress did not act. "If you want people to support an action," says Dennis Mileti, an expert on risk communications who has studied hundreds of disasters of the more conventional kind at the University of Colorado, Boulder, "you need to link the action to cutting people's losses. And that link isn't in place."

Here is what administration and Congressional leaders must do if they want to convince the public to get behind the next iteration of a plan - assuming, of course, they come up with a plan worth backing:

Find a face: Human beings are not moved by numbers or by vague predictions of certain doom. They are moved by stories. "It's simple," says Mileti. "You get one family in America. You go to their house. And you paint a picture of what their life is like one year from now. You describe a kid who can't go to college, the house that can't be sold, the inability of anyone to use a credit card. They need to get a camera crew and go to Omaha and find a family."

Rebrand the Bill: The phrase "bailout" is a deal-killer. "People feel the breaks are being given to financial institutions and not to the consumer," says Slovic. He recommends "Consumer Protection Act." It may be too late for this change to have much impact, but any change in language that acknowledges real people would be an improvement.

Shoot the Messenger: If you want people to support the radical idea of rescuing rich investment bankers, don't send a rich, former investment banker (Henry Paulson) to convince them. And don't send a discredited, lame duck President, either. As in normal life, people are more likely to believe the advice of someone they trust. There aren't many well-known experts in this field who aren't rich, but even Warren Buffet would have brought less baggage to the process than George Bush.

Be Specific: People need to know what will happen if they do nothing - or if they do something.

So far, Paulson and Bernanke have been only been specific behind closed doors. On Sept. 18, they warned Congressional leaders what inaction would bring: a stock-market crash, sky-high unemployment, Americans unable to get car loans, banks failing so fast that they would quickly drain the federal deposit insurance fund and people's life savings.

Paulson did not use those words when he went on TV a few days later - probably because he was afraid of provoking widespread financial panic. But that risk needs to be weighed against the risk that no one will panic at all.

"People don't perceive risk," says Mileti. "People actually perceive that they are safe." To override that bias, you have to talk to people in a language their brains understand.
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LisaW



Joined: 05 Apr 2007
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PostPosted: Thu Oct 02, 2008 4:30 am    Post subject: Reply with quote

I understand the point ... but there's more to it, I think.

We were told "Oh, if something isn't done by Friday, the world will end." Then Friday came and went and life went on. Then "If the House doesn't pass the package on Monday, the world will really come to and end!" And, the vote failed, the market drop 770 points -- and the world didn't end. And on Tuesday, the market went back up 400+ points. And there were still places offering low interest loans for cars, houses, etc. And Congress took at bit of a rosh hashanah break.

Is this situation serious? Yes. Does something have to be done? Probably. Have those calling for the bailout convinced people that creating a bank within the government controlled by one, unelected official with some vague but way-powerful actions is the only way? Nope.

Today, on a local radio program while discussing the lack of loan money, an owner of several large car dealerships was talking with the host. He mentioned how dealerships do not own the cars on the lot. Rather the bank loans them the money, the dealership pays interest on the loan and when the vehicle sells, the dealership pays off the car. Sounds right. Then the dealer went on to say he'd been talking with an exec from one of the local large banks (declined to give the name) and that exec told him "We don't have the funds to be able to loan to open any new dealerships." Sounds ominous -- except, wait -- NEW dealerships? We don't need any new dealerships -- there are plenty in town. Bank didn't say they couldn't loan on any more cars, just so many as to open a new dealership. Cars aren't selling that fast, anyway, and as they are and dealers need to replenish their stock, the old loans will have been paid. And it isn't just this "credit crunch" that has people not buying cars. It's the high fuel costs and other uncertainties, this latest crunch is just One More Thing.

So, basically, quit telling us the sky will be falling today if something isn't down today when quite obviously tomorrow has come and we're still plugging along. Pretend most of us have a brain in our heads and give us the real meat and potatoes of the problem.
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LizE



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PostPosted: Fri Oct 03, 2008 10:21 am    Post subject: Reply with quote

Well said, Lisa! I just want to add that it also might have something to do with the fact that this administration has tried this trick before, telling us that if we don't act RIGHT NOW something awful will happen. It's only later we've found out that the situation wasn't quite as clear-cut as we were led to believe. It could be a a case of the Prez Who Cried Wolf and we'll all be sorry we didn't just hand over that blank check without any questions or oversight. Somehow, though, I doubt that was the only solution to our economic woes--and there are an awful lot of economists who agree.

Oh, and did anybody else find that article a little scary? Talking about how the government blew it--not because their plan sucked, but because they didn't psychologically manipulate us into buying into it. Yikes!
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LLB



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PostPosted: Fri Oct 03, 2008 11:26 am    Post subject: Lessons of History Reply with quote

It turns out that Ben Bernanke is a student of Japanese financial history and the collapse of their financial markets and subsequent failure to recover can be traced to their legislators failing to act quickly enough because they didn't understand the ramifications. I think that the Republicans who voted against the bailout because it was a slippery slope to socialism just aren't living in 2008. As one NYT op-ed piece mentioned, this is no longer 1984, when Reagan was president and socialism was the biggest evil of the day. With globalism and an international economy, as well as the decline of the U.S. in a multitude of ways, our lack of handling this matter may well come back and bite us on the butt...and quicker than we think.
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LisaW



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PostPosted: Mon Oct 06, 2008 2:58 pm    Post subject: Re: Lessons of History Reply with quote

LLB wrote:
It turns out that Ben Bernanke is a student of Japanese financial history and the collapse of their financial markets and subsequent failure to recover can be traced to their legislators failing to act quickly enough because they didn't understand the ramifications. I think that the Republicans who voted against the bailout because it was a slippery slope to socialism just aren't living in 2008. As one NYT op-ed piece mentioned, this is no longer 1984, when Reagan was president and socialism was the biggest evil of the day. With globalism and an international economy, as well as the decline of the U.S. in a multitude of ways, our lack of handling this matter may well come back and bite us on the butt...and quicker than we think.


Except ...

It's now been pased, padded with an additional $140Billion of Pork (wow, this bill was sooooo important and yet it had to be used to produce earmarks with a Veto-proof smack in the face), and nothing still has been done. The markets are still working, down, but not in free fall (and I'll betcha George Soros and the like are making a killing no matter which way it goes) ... so .... just what is the real story?
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LizE



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PostPosted: Mon Oct 06, 2008 2:59 pm    Post subject: Re: Lessons of History Reply with quote

LLB wrote:
I think that the Republicans who voted against the bailout because it was a slippery slope to socialism just aren't living in 2008.


Do you think this is the reason most republicans voted against the bailout?How about the democrats who voted against it? (This isn't a "gotcha" I really want to know what you think).
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LisaW



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PostPosted: Mon Oct 06, 2008 10:45 pm    Post subject: Re: Lessons of History Reply with quote

LizE wrote:
LLB wrote:
I think that the Republicans who voted against the bailout because it was a slippery slope to socialism just aren't living in 2008.


Do you think this is the reason most republicans voted against the bailout?How about the democrats who voted against it? (This isn't a "gotcha" I really want to know what you think).


Rep Mike Pence (R-Indiana) is probably one of the major players in the Anti-Bailout movement. He explains his reasons for not supporting the bailout http://www.humanevents.com/article.php?id=28751. The gist of the article? "Economic freedom means the freedom to succeed and the freedom to fail."

A lot of the Dems who didn't support the bailout didn't because they are facing very tight races for re-election in November. At the first vote, a lot of the Republicans, not liking the bailout and not liking what appeared to be a Dem movement to have the Republicans pass the bail out while Democrats stayed away opted not to vote for it. The Congressional Whip was, apparently, not "whipping" the Democrats into supporting the bailout.

Personally, I object to having my money used to bailout people who were making millions and billions by pushing bad mortgages. 96% of the people with mortgages are still faithfully paying on those mortgages. That means, over $700billion is going to handle less than 4% of problems. I want to see all those execs who got massive bonuses and salaries in the last 9 years (this started in 1999 -- before the George W Bush Administration -- being forced to pay back those bonuses and salaries to cover the "bad paper." Instead, you, me, your children and your grand children (my "kids" are 4 legged) will be the ones covering and those execs are still living the high life. That's why I object to it.
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dick



Joined: 22 Mar 2007
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PostPosted: Tue Oct 07, 2008 10:58 am    Post subject: Reply with quote

lisa w wrote: "Personally, I object to having my money used to bailout people who were making millions and billions by pushing bad mortgages. 96% of the people with mortgages are still faithfully paying on those mortgages. That means, over $700billion is going to handle less than 4% of problems. I want to see all those execs who got massive bonuses and salaries in the last 9 years (this started in 1999 -- before the George W Bush Administration -- being forced to pay back those bonuses and salaries to cover the "bad paper." Instead, you, me, your children and your grand children (my "kids" are 4 legged) will be the ones covering and those execs are still living the high life. That's why I object to it."

I object to all those things too. But I would object even more were we to return to the thirties and early forties, when depression was in full swing and mitigated only by the government spending instituted by FDR.

I look at the bailout much like a case of the flu: I didn't cause it, I didn't give it to myself, I didn't want it, but I'm willing to spend a considerable amount of money to get over it as quickly as possible.

I'd like to punish whomever gave it to me, but I'd like getting over it even better.
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LisaW



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PostPosted: Wed Oct 08, 2008 3:21 am    Post subject: Reply with quote

dick wrote:

I look at the bailout much like a case of the flu: I didn't cause it, I didn't give it to myself, I didn't want it, but I'm willing to spend a considerable amount of money to get over it as quickly as possible.

I'd like to punish whomever gave it to me, but I'd like getting over it even better.


Well, I look at the bailout as just one more way the American taxpayer is getting the shaft.

Quote:

AIG Draws Fire for Executives' $440,000 Post-Bailout Retreat at Posh California Resort

WASHINGTON Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday.

The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.
(more)

http://www.foxnews.com/story/0,2933,434223,00.html

Wow, sure glad we could pay for those spa treatments.

Flu ... yeah, maybe the 1918 version!
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dick



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PostPosted: Wed Oct 08, 2008 10:49 am    Post subject: Reply with quote

Well, hey, lisaw, I'm only saying that, if the bailout works, we're all for more likely to be better off, and, galling as it is, being shafted is not as hard to take as a deep recession or depression would be. I lived the first decade of my life experiencing the results of economic depression. The average joe is the one who suffers most in one. So let's hope the bailout works.
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KarenS



Joined: 23 Mar 2007
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PostPosted: Wed Oct 08, 2008 2:52 pm    Post subject: Reply with quote

If anything it would behoove us all to tighten our belts. My parents and in-laws also lived during the Depression and their generation seemed to be better money managers than my generation and my kid's generation. I think it's been too easy for us to use credit to our detriment. Buying things on credit has put many Americans in a financial bind. Keeping up with the Joneses mentality hasn't been good for the majority of us or wanting the best when we couldn't afford it has hurt as well. So maybe there's a lesson to be learned here in managing our own finances.

We do need a good kick to the economy. Bill Clinton back in 2002 on the Dave Letterman show stated that switching from an oil-based economy to alternative energy would provide the stimulus to a stronger American economy. Obama agrees with this philosophy so I am glad that he sees this as a priority if he's elected President. It must be done right and I do feel the Democrats will do it right.

For now there's going to be bumps along the way but here's hoping things will improve. FWIW, just to add a partisan comment in this mix. A high Republican operative in my county says his party is good at getting electing but once elected can't govern. The Democrats can govern but can't get elected. Personally, I would rather have the Democrats who know how to govern to be in charge at this crucial time in our country's history. Do we go forward or do we regress?
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Maggie AAR
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PostPosted: Wed Oct 08, 2008 4:07 pm    Post subject: Reply with quote

KarenS wrote:


We do need a good kick to the economy. Bill Clinton back in 2002 on the Dave Letterman show stated that switching from an oil-based economy to alternative energy would provide the stimulus to a stronger American economy. Obama agrees with this philosophy so I am glad that he sees this as a priority if he's elected President. It must be done right and I do feel the Democrats will do it right.


Karen,

Jimmy Carter also said this back when he was president. In fact, every president since Carter has said it. And yet none of our democratic presidents (and Bill had EIGHT YEARS) or republicans (I expected nothing from W, he and Cheney are oil men through and through) did a thing towards it. I have a hunch that if Obama wins office I will still be using as much oil when he leaves as when he went in. If Americans want to use less oil we really, really need to do this ourselves. That's why I signed on with Pickens Plan. It's not a solution, it's not even the best plan available but I think if we as a people actually want this to happen we will have to MAKE it happen. Our government after 30 years and people from both parties controlling both the presidency and the senate doesn't seem to want to.

maggie b.
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Maggie AAR
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Joined: 23 Mar 2007
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PostPosted: Wed Oct 08, 2008 4:25 pm    Post subject: Reply with quote

dick wrote:


I object to all those things too. But I would object even more were we to return to the thirties and early forties, when depression was in full swing and mitigated only by the government spending instituted by FDR.

I look at the bailout much like a case of the flu: I didn't cause it, I didn't give it to myself, I didn't want it, but I'm willing to spend a considerable amount of money to get over it as quickly as possible.

I'd like to punish whomever gave it to me, but I'd like getting over it even better.


dick,

You are so wise! This is exactly how I look at it too!

And Lisa W., I was talking to a friend last night about the rich making it out of this whole thing still rich. Yes, it is evil. It is awful. If we were China these men would be imprisoned and most probably killed without a trial and ooh, how a part of me wants that. But realistically, this just ain't gonna happen. HOWEVER, I think Americans should consider doing *something* via government that would limit a CEO's and other executives ability to get rich while their company goes in the tank. I also think we need to keep company's from doing things like conferences in Paris, doctor's going to Sandal's resorts to buy new tools and spa weekends like mentioned before.

maggie b.
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KarenS



Joined: 23 Mar 2007
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Location: Florida

PostPosted: Wed Oct 08, 2008 4:50 pm    Post subject: Reply with quote

maggie b. wrote:
KarenS wrote:


We do need a good kick to the economy. Bill Clinton back in 2002 on the Dave Letterman show stated that switching from an oil-based economy to alternative energy would provide the stimulus to a stronger American economy. Obama agrees with this philosophy so I am glad that he sees this as a priority if he's elected President. It must be done right and I do feel the Democrats will do it right.


Karen,

Jimmy Carter also said this back when he was president. In fact, every president since Carter has said it. And yet none of our democratic presidents (and Bill had EIGHT YEARS) or republicans (I expected nothing from W, he and Cheney are oil men through and through) did a thing towards it. I have a hunch that if Obama wins office I will still be using as much oil when he leaves as when he went in. If Americans want to use less oil we really, really need to do this ourselves. That's why I signed on with Pickens Plan. It's not a solution, it's not even the best plan available but I think if we as a people actually want this to happen we will have to MAKE it happen. Our government after 30 years and people from both parties controlling both the presidency and the senate doesn't seem to want to.

maggie b.



The oil industry is a powerful lobby that keeps on giving to our elected officials. They basically own them and until they stop voting in favor of the oil companies not a whole lot will be done. We as the voters, taxpayers and citizens should demand government do the right thing by putting what's best for the country ahead of their own self-interests.

Pickens also is trying to line his pockets so I am on the fence with him.

With Carter remember he was ridiculed for wanting to change to alternative forms of energy. The Republicans came to power with Reagan and his administration disdaining conservation. Reagan basically turned back the clock to any conservation efforts in this country. And that has been the mantra of the Republican party. All they know is oil so why should they change now.

Democrats seem to be a little more environmentally friendly so I do see this change-over occurring under Obama. I don't see McCain embracing alternative energy. But as long as the oil companies own our elected officials it will be slow going. Will Obama be able to make the case that it's the right thing for America and will the American public get on board. We will have to see.
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dick



Joined: 22 Mar 2007
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PostPosted: Thu Oct 09, 2008 10:35 am    Post subject: Reply with quote

Unfortunately, money talks louder than morality. I've reluctant sympathy for politicians: They can't accomplish anything until they get elected; to get elected in the present world, they need money; it's a debt of a kind. The oil industry rolls in money and they want the politicians to be in their debt. Vicious scenario.

And then, of course, not a one of us would give up our cars, would we?

I hate that I have to acknowledge the correctness of Lincoln Steffens' comment about politics--a little corruption with more of good than bad is better than no good at all.
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