Ethan Bloch: Welcome to WSYK, What Should You Know. I am Ethan Bloch, and what should you know?
Female speaker: What should you know? You are watching What Should You Know, because it's beyond this what should you know.
Ethan Bloch: So when someone comes up to you, and asks if you know about The Bailout, this is what you should say, "Of course I don't know about The Bailout, are you serious you are talking about like $700 bazillion". What! We are spending $700 billion dollars to bailout the economy.
Well, not quite, what we all need to be clear on is that this $700 billion is being used to buy investments. I will be it shi***g investments. But investments, nonetheless that are backed by real houses, I will be it over priced houses. So we are not just flushing money down the toilet, we are buying shi***g s**t that maybe worth something someday.
So to think we are just loosing $700 billion is ludicrous. We are investing up to $700 billion in toxic assets, that are toxic because nobody wants to buy them. You see if no one wants to but an asset there is no way to know what that asset is worth.
So, for example, if I want to sell this pen, but no one wants to but my pen, what's the pen worth? Nothing. But now if the government steps in and says, "Okay, okay, we think that pen is worth somewhere in the ballpark of a few hundred million dollars", well then we have just recreated the market from my pen.
Starting to understand, maybe, well hold your horses because it isn't over yet, because the treasury is going to be using something called a reverse auction to buy back all these toxic assets. So basically, the treasury is going to put out purchase bids for certain collections of mortgage back securities. They are going to be like, "Hey financial institutions! We want to buy this particular security for this price." Then financial institutions will submit sell bids for those same collections of securities, saying, "Hey treasury! We have those securities and we willing to sell them to you at price."
The stipulation is however at the financial institutions, sell bid has to be the less than the treasury's purchase bid. And then the treasury will make purchases from the lowest bidders, it's like a really fu***d up prices, right. Without Drew Carrey or Bob Barker, spend a noody to your pets my friends.
So that's a logistics of the bailout. Let's talk about the actual bailout bail for a minute. The initial clean version of the bail which clocked in at just two and a half pages was at first rejected by Congress, because Americans all over the country were calling the Congress men like, "Hey! We don't trust you, you guys aren't cool, don't bailout all these mistake makers."
So instead, because the Congress is brilliant, we passed a bloated 450 pager that included a 150 billion in tax breaks, like weird specific tax breaks for manufactures of wooden arrows. Who uses wooden arrows? I prefer the metal ones.
But don't be fooled, the panic isn't over quite yet. Well what took place this past week are essential steps in hopefully restoring trust in our financial markets. So now the American people will own a crap ton of CDOs and mortgage-backed securities that nobody else had the balls to buy.
That's what I know about the Bailout. This is another episode of WSYK, What Should You Know; I am Ethan Bloch in What Should You Know.
Female speaker: What should you know? You are watching What Should You Know because that's beyond this what should you know.
Banker Cat does not approve your loan.
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