This Is An Amazing Thing To Remember: The $700 Billion Bail Out Is Passed And Here Are Some Notes From That Day | Exploring Markets

This Is An Amazing Thing To Remember: The $700 Billion Bail Out Is Passed And Here Are Some Notes From That Day

Notes:
  • $700 billion raised through taxes will be lent to financial companies to ease their bad debt expenses and bad mortgages. 
  • the $700 billion is expected to be paid back over time with interest on the loan. it is very possible the gov't could profit from this.
  • any financial sector that was hampered by the subprime lending is now eased.

Economic Standpoints:

  • inflation and employment face a short-run trade off. employment will restore itself for now.
  • moral hazards are in effect. can finance companies fail? 
  • too much asymmetric information
  • foreign investors will back off America for the short term
  • investing will be forever changed because of government intervention.
  • Hedge Funds: "They feel the rules have been changed [and] they're not going to play."

Investors compared to football:

If the NFL embellished a rule that all line men could only 250 pounds or less the game would change. Owners and GM's would be in disarray and no moves would be made until the rules were truly set in stone.  Like the government intervention the short term result is frozen markets.


iQuotes:
  1. Jason Calacanis recently predicted "50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months."
  2. TechCrunch warns that start-ups who've failed to raise at least $25 million are at risk.
  3. "All startups are going to have to batten down the hatches, get leaner, and work to get profitable," says Fred Wilson.
  4. The New York Times reports: "High-tech entrepreneurs, investors and executives now believe the question is when, not if, the financial chaos will hurt the country's cradle of innovation.