WEBVTT - How the Bailout Works 0:00:00.280 --> 0:00:02.840 Brought to you by the reinvented two thousand twelve camera. 0:00:03.160 --> 0:00:07.640 It's ready. Are you welcome to Stuff you should know? 0:00:08.200 --> 0:00:12.160 From how Stuff works dot com. This podcast is brought 0:00:12.160 --> 0:00:15.360 to you by Audible dot com, the Internet's leading provider 0:00:15.400 --> 0:00:19.200 of spoken word entertainment. Get a free audio book download 0:00:19.200 --> 0:00:22.160 of your choice when you sign up today. Log on 0:00:22.280 --> 0:00:28.240 to audible podcast dot com slash stuff today for details. Hey, 0:00:28.320 --> 0:00:32.640 welcome to the podcast. I'm Josh. This is Chuck Nothing. 0:00:32.920 --> 0:00:37.360 I'm here, all right? Sorry? Keep it everyone into Spence 0:00:37.800 --> 0:00:40.600 is Chuck here? Well, we need to wear the violence 0:00:40.640 --> 0:00:45.840 of correct um. Chuck. You watch Criminal Minds? I don't. 0:00:46.280 --> 0:00:51.159 Do you watch Private Practice? I don't Biggest Loser? No? 0:00:52.200 --> 0:00:55.080 What about okay? This is the fourth and last network. 0:00:55.080 --> 0:00:58.840 What about Until Death? I've never even heard of it. Okay, 0:00:59.040 --> 0:01:02.800 I watch comedy, so cartoons. Until Death is a comedy. 0:01:02.840 --> 0:01:06.039 But had you watched any of these shows, had you 0:01:06.080 --> 0:01:09.679 been a big fan on Wednesday September, you would have 0:01:09.720 --> 0:01:13.440 been very upset because they were all preempted. I bet 0:01:13.560 --> 0:01:17.000 they were all pre empted already. You're well aware that 0:01:17.240 --> 0:01:21.760 the the economy is in the toilet. All you do, 0:01:21.880 --> 0:01:23.880 all you want to do, is sit back and watch 0:01:23.880 --> 0:01:28.200 your favorite celebrities lose weight, or watch Brad Garrett, you know, 0:01:28.520 --> 0:01:32.360 um tussle verbally with his wife, or you know whatever 0:01:32.520 --> 0:01:35.880 private practice does. I'm not I'm not fully aware practicing 0:01:35.920 --> 0:01:39.160 private things. Exactly. You want to you want to escape 0:01:39.160 --> 0:01:41.920 through these And all of a sudden, here's George Bush 0:01:42.319 --> 0:01:44.720 laying it out there. This is a president who's avoided 0:01:44.800 --> 0:01:47.800 using the word recession in public, and all of a sudden, 0:01:47.960 --> 0:01:51.560 he's basically white knuckling the podium with the presidential seal 0:01:51.640 --> 0:01:54.400 in front, saying we're all gonna die. Maybe he just 0:01:54.440 --> 0:01:57.520 wanted to skip straight to depression just for kicks. I guess, 0:01:57.560 --> 0:02:01.600 you knowid recession go right to the oppression. I don't 0:02:01.720 --> 0:02:06.160 know that he used the word depression now, but he might. 0:02:06.400 --> 0:02:08.600 He may as well have. Right, it was bad. He 0:02:08.680 --> 0:02:12.280 said our entire economy is in danger. Was one quote 0:02:12.360 --> 0:02:18.200 from that very um, you know, great address. Unusual. He 0:02:18.240 --> 0:02:20.280 doesn't usually do this kind of thing, right. I think 0:02:20.280 --> 0:02:22.600 he should have followed that sentence up immediately with with 0:02:22.840 --> 0:02:26.239 good luck to whoever's coming next exactly. Yeah, yeah, so 0:02:26.280 --> 0:02:30.400 long and good luck or whatever? Right? Yeah, uh so 0:02:30.880 --> 0:02:32.880 this is kind of a big deal. And I think 0:02:32.960 --> 0:02:36.639 Bush addressing on a Thursday for no other reason than 0:02:36.680 --> 0:02:39.760 to tell Americans that the economy is in danger, it 0:02:39.880 --> 0:02:43.680 kind of really made it a bigger point. Um. And 0:02:43.720 --> 0:02:46.239 the reason he went on was because he was trying 0:02:46.280 --> 0:02:51.360 to garner public opinion for the Pulse and Plan, also 0:02:51.440 --> 0:02:54.760 known as the seven hundred billion dollar bailout. Ak A, 0:02:55.080 --> 0:02:58.840 just the bailout. I think people are calling it bailout. 0:02:58.919 --> 0:03:02.040 It is and it's not hyphenated for our listeners, it's 0:03:02.040 --> 0:03:04.519 not two words, it's one word. This is this is 0:03:04.600 --> 0:03:08.680 a p right here, Okay, not us um. So he's 0:03:08.720 --> 0:03:11.960 on there, he's talking about the bailout. Why would he care? 0:03:12.000 --> 0:03:14.880 Why would he care what Americans think? I'll tell you why, Chuck, 0:03:15.639 --> 0:03:18.839 You didn't even let me answer, But he's uh, he 0:03:18.960 --> 0:03:22.400 has um. Earlier that week, it looked like Congress was 0:03:22.440 --> 0:03:24.800 going to pass it. Everybody was patting one another on 0:03:24.880 --> 0:03:30.799 the back bipartisan ship. You know, you remember Senate Democrat Republican. 0:03:30.840 --> 0:03:34.240 The leaders are saying, we're passing this right and uh, 0:03:34.280 --> 0:03:36.480 it starts to go into the House and they bring 0:03:36.480 --> 0:03:38.440 it to a vote, and all of a sudden, these 0:03:38.680 --> 0:03:42.480 rank and file Republicans stay just revolt and they're like, hey, 0:03:42.520 --> 0:03:44.600 how about this. We've got another plan and it's nothing 0:03:44.640 --> 0:03:51.480 like yours. So ultimately the House defeats the bill something 0:03:51.560 --> 0:03:54.680 like that. I think it was good exactly that you're 0:03:54.720 --> 0:03:56.720 really good. It's right in front of me, a memory 0:03:56.760 --> 0:04:01.360 like a bear trap there should um okay, So the 0:04:01.400 --> 0:04:04.560 House defeats the bill. It looks like it's sunk. There's people, 0:04:04.720 --> 0:04:08.320 you know, screaming in teror dogs and cats living together 0:04:08.920 --> 0:04:14.240 mass hysteria. Right um, and Bush has already played his 0:04:14.320 --> 0:04:16.960 one ace in the hole by addressing the the nation. 0:04:17.200 --> 0:04:19.120 The only thing next he could do would be like 0:04:19.200 --> 0:04:23.520 to kneecap somebody, maybe a figure skater on public television 0:04:23.560 --> 0:04:26.039 to get our attention. Who would do that, though? I 0:04:26.080 --> 0:04:28.800 don't know. Terrible, terrible. So it looks like the bill 0:04:28.839 --> 0:04:31.359 is defeated, and all of a sudden, here comes the 0:04:31.400 --> 0:04:34.799 Senate on the white Horse exactly. You know, the House 0:04:34.920 --> 0:04:38.560 is usually kind of the the the congressional body that's 0:04:38.600 --> 0:04:42.640 known for shouting down things and you know, trying things 0:04:42.680 --> 0:04:44.920 on the sly, and the Senate is supposed to be 0:04:45.000 --> 0:04:48.920 wise and sedate and calm, and all of a sudden 0:04:48.960 --> 0:04:54.000 they're taking up a failed House bill basically sweetening it, 0:04:54.480 --> 0:04:57.440 like they attached a very popular mental health bill. Did 0:04:57.440 --> 0:05:01.320 you know that now U healthcare providers have to treat 0:05:01.360 --> 0:05:04.880 mental health like they treat physical maladies. Well, that's good. Yeah, 0:05:04.920 --> 0:05:06.760 it is good, which is one of the reasons why 0:05:06.760 --> 0:05:08.839 they put it in this bill. So they passed. There's 0:05:08.839 --> 0:05:10.560 also a lot of pork in there, though. There are 0:05:11.080 --> 0:05:15.239 manufacturers of wooden arrows that I think boy Scouts favor 0:05:15.480 --> 0:05:18.480 get some subsidies out of that. Yeah. Um. And then 0:05:18.480 --> 0:05:22.760 there's the extension of expiring tax breaks for the wealthy, 0:05:23.240 --> 0:05:25.840 although there's also some tax relief for the middle class, 0:05:25.880 --> 0:05:28.000 new tax relief in their right, and I know they 0:05:28.200 --> 0:05:30.120 One important thing that did was raised the fd I 0:05:30.200 --> 0:05:33.640 S S insurance coverage for people's banks accounts. Yeah, which 0:05:33.680 --> 0:05:36.760 is huge because banks like Wacovia and Washington Mutual are 0:05:36.800 --> 0:05:40.240 going under. And I mean these are neighborhood branch commercial 0:05:40.279 --> 0:05:43.159 banks where you keep your money and all of a sudden, 0:05:43.160 --> 0:05:45.840 oh wait, the bank's front door is locked, and you 0:05:45.880 --> 0:05:49.160 know two pm on a Tuesday was one of them. Really, 0:05:49.320 --> 0:05:51.840 not one of the banks, but one of those institutions. 0:05:51.839 --> 0:05:55.640 I'm not going to divulge too much, but Yeah, that's good. Well, 0:05:55.680 --> 0:05:58.200 I'm not going to name my bank either, but I'm 0:05:58.320 --> 0:06:03.440 very confident in it. Recently purchased countrywide um, among other things. 0:06:03.480 --> 0:06:05.640 So I'm feeling pretty good about my bank, which is 0:06:05.680 --> 0:06:09.920 your under your mattress. Knock on wood there. I don't 0:06:09.920 --> 0:06:13.800 want to attempt the gods. Uh So, Okay, the Senate 0:06:13.839 --> 0:06:17.159 takes up the bill and they add the sweeteners, and 0:06:17.240 --> 0:06:21.560 they cough up Senate Amendment fifty five, which is the 0:06:21.600 --> 0:06:23.600 pulse and Plan with the mental Health Bill, the f 0:06:23.720 --> 0:06:27.680 d i C Increase Plan Plus is what I like 0:06:27.760 --> 0:06:29.280 to call it. It's a great name for it. You 0:06:29.320 --> 0:06:31.040 should have called it that. This is the same day 0:06:31.040 --> 0:06:33.800 they passed it, the same day that they took this up, right, 0:06:34.240 --> 0:06:38.320 but the Congress never acts this fast. Even more amazing, 0:06:38.360 --> 0:06:42.160 two days later the House gets it. That day they 0:06:42.200 --> 0:06:44.080 pass it. I think they passed it at like twelve 0:06:44.120 --> 0:06:46.440 thirty and they started deliberating on it at ten in 0:06:46.480 --> 0:06:49.240 the morning. They passed it two and a half hours later. Yeah, 0:06:49.279 --> 0:06:52.320 I wondered when it happened. If no one really knows this, probably, 0:06:52.360 --> 0:06:55.560 but if it was the sweeteners actually, or if the 0:06:55.600 --> 0:06:57.360 House kind of ended up with some egg on their 0:06:57.360 --> 0:07:00.760 face with the first vote and realize said everyone was 0:07:00.839 --> 0:07:03.080 really freaked out by the fact that they defeated it. Well, 0:07:03.120 --> 0:07:06.240 I think number one. I think Bush's address actually did 0:07:06.279 --> 0:07:09.080 have a real impact. I watched a lot of CNN. 0:07:09.120 --> 0:07:12.120 I actually watched CNN live as the House was voting 0:07:12.160 --> 0:07:16.160 on this UM, this amendment and UM. There were a 0:07:16.160 --> 0:07:20.360 lot of congressmen who are congress people who said that 0:07:20.400 --> 0:07:23.280 they switched their vote because the calls that they were 0:07:23.280 --> 0:07:26.440 getting from their office changed from you know, I don't 0:07:26.480 --> 0:07:29.520 like this bailout package to you've got to vote for 0:07:29.520 --> 0:07:32.480 this bailout package. And that actually changed votes. And you 0:07:32.480 --> 0:07:35.320 can probably directly link that to Bush, you know, looking 0:07:35.440 --> 0:07:38.440 very tired and haggard and scared on you know, Wednesday, 0:07:38.480 --> 0:07:42.200 September four. So I think that's one of the reasons 0:07:42.280 --> 0:07:44.520 why the House actually passed. You know, my uncle's a 0:07:44.560 --> 0:07:46.840 former congressman. I should give him a call and see 0:07:46.840 --> 0:07:49.360 what he thinks about the whole thing. Where is he from. Yeah, 0:07:49.400 --> 0:07:51.920 he's a congressman in Tennessee to two or three terms. 0:07:51.960 --> 0:07:54.880 I think that's great. Yeah, good for him. Okay, so 0:07:55.280 --> 0:07:58.400 it passes right, right, and it's actually no longer a 0:07:58.440 --> 0:08:02.520 seven billion dollar bailout, the bailout seven hundred billion, but 0:08:02.640 --> 0:08:05.760 this bill actually hiked it up to an eight hundred 0:08:05.760 --> 0:08:08.560 and ten billion dollar bill. Did you know that? You know, 0:08:08.600 --> 0:08:13.320 I didn't know that all that all that, like it matters. 0:08:13.760 --> 0:08:15.880 And the weird thing is, as taxes these days, you 0:08:16.040 --> 0:08:19.000 you don't you don't really feel a pinch like you 0:08:19.040 --> 0:08:23.600 think about the government showing out seven hundred billion dollars? 0:08:23.600 --> 0:08:25.679 How how how are we going to feel that pinch? 0:08:26.760 --> 0:08:29.360 And you know, actually for every American that's I think 0:08:29.480 --> 0:08:34.160 twenty three hundred dollars a person, every American taxpayer. Non, 0:08:35.120 --> 0:08:38.480 so we're gonna feel a pinch somewhere, or are we. 0:08:39.040 --> 0:08:41.760 Let's get into this bill, Chuck, Let's get into the 0:08:41.760 --> 0:08:43.640 meat up. Let's do it. So you want to you 0:08:43.640 --> 0:08:45.280 want to lead off with what are some of the 0:08:45.320 --> 0:08:48.800 things that are inside? I see by you burying your teeth, 0:08:48.840 --> 0:08:50.480 are you? Are you cool? Well? No, I know that 0:08:50.559 --> 0:08:52.800 it's that one of the things they signed off one 0:08:53.000 --> 0:08:55.520 was an immediate three hundred and fifty billion. They kind 0:08:55.520 --> 0:08:58.719 of did it in stages, which I'm not a I'm 0:08:58.720 --> 0:09:00.880 no economists, but seems to be kind of the smarter 0:09:00.920 --> 0:09:05.240 way to go. Three D fifty billion upfront and taxpayer money, 0:09:05.600 --> 0:09:09.959 and then the new newly created Office of Financial Stability, 0:09:10.000 --> 0:09:12.200 which we hope it ends up living up to its name. 0:09:13.080 --> 0:09:16.640 Another three hundred and fifty I'm sorry, another hundred billion 0:09:16.679 --> 0:09:19.760 after that, and then another two fifty after that. But 0:09:20.080 --> 0:09:22.400 both of those need approval by Congress. Yeah, and I 0:09:22.440 --> 0:09:25.679 think the first one, the hundred billion, has to get 0:09:25.679 --> 0:09:30.000 approval from the House, and the second two fifty billion, 0:09:30.760 --> 0:09:35.160 uh is is contingent upon some approval I think. But 0:09:35.200 --> 0:09:37.880 either way, yeah, Congress has to approve these, and they 0:09:38.000 --> 0:09:41.240 have to. They'll approve them if this whole thing is working. 0:09:41.840 --> 0:09:44.360 I don't see them saying no though. No, I don't either. 0:09:44.559 --> 0:09:49.320 I mean, I think in for three billion right plus, 0:09:49.400 --> 0:09:51.640 it would be it would kind of be a sign that, hey, 0:09:52.040 --> 0:09:54.800 we did the wrong thing by allowing this first three 0:09:54.880 --> 0:09:56.880 hundred and fifty billions. I don't think they would do 0:09:56.880 --> 0:09:59.840 that yet. Yeah, I agree, I agree. So um, like 0:10:00.000 --> 0:10:03.400 he said, this, this bill establishes a brand new office. 0:10:03.400 --> 0:10:05.920 We're gonna have a brand new office, right, like you said, 0:10:05.920 --> 0:10:09.160 the Office of Financial Stability. And this is led by 0:10:09.240 --> 0:10:14.280 the Treasury Secretary, not necessarily Henry Paulson, but whoever is. Well, 0:10:14.320 --> 0:10:17.640 they just named actually yesterday the new bailout chief. Oh 0:10:17.720 --> 0:10:21.160 really who Yeah, you don't even know this? No, yeah, 0:10:21.160 --> 0:10:24.880 his name is Neil kash kash Karai. And this guy 0:10:25.000 --> 0:10:27.800 is thirty five years old, Holy cow. Yeah, and he's 0:10:27.800 --> 0:10:29.520 going to be in charge of doling out the cast. 0:10:29.600 --> 0:10:32.960 He's overseeing the Office of Financial Stability. He was previously 0:10:33.120 --> 0:10:36.319 a vice president of Goldman Sachs and before his career 0:10:36.320 --> 0:10:40.640 in finance, he developed technology for NASA space missions. So 0:10:41.160 --> 0:10:43.600 this guy was clearly doing things in college that I 0:10:43.640 --> 0:10:46.800 wasn't doing. Yeah, thirty five, that's not a very long 0:10:46.840 --> 0:10:49.960 existence that he seems to be sharp guy. Okay, so 0:10:50.040 --> 0:10:54.200 we have a brand new TSAR of Economic Stability. I 0:10:54.200 --> 0:10:57.760 guess fresh fresh meat. And what with this Oh I'll 0:10:57.760 --> 0:11:02.679 bet you he ages twenty years over the next months. Um. So, basically, 0:11:02.720 --> 0:11:05.239 what this guy is going to be in charge of, essentially, 0:11:05.760 --> 0:11:09.760 UH is buying up terrible investments that that you know, 0:11:09.960 --> 0:11:14.400 banks and investment banks and and other kinds of firms 0:11:14.440 --> 0:11:16.839 have on their hands. What a weird job. It is 0:11:16.880 --> 0:11:19.280 a weird job. It's never been done before as far 0:11:19.320 --> 0:11:24.360 as I know. Basically, there's certain types of investments that 0:11:24.400 --> 0:11:27.800 can be bought, and all of them are related to mortgages. 0:11:28.080 --> 0:11:32.080 You've got like mortgage backed securities. UM. I think collateral 0:11:32.200 --> 0:11:37.280 debt obligations would be purchased under this and mortgages themselves, 0:11:37.800 --> 0:11:40.320 which I thought was kind of cool. Yeah, because this 0:11:40.440 --> 0:11:43.880 is actually one way that it could directly benefit a homeowner. 0:11:44.360 --> 0:11:47.800 One of the provisions in this act is that when 0:11:48.440 --> 0:11:52.240 this guy what's his name again, uh Neil kash Karai 0:11:52.400 --> 0:11:54.600 or Kashkari, I'm not sure you pronounce it, let's call 0:11:54.679 --> 0:11:59.920 him Kashkari, Okay, when Kashkari is negotiating with these investment 0:12:00.040 --> 0:12:04.160 banks and other people to purchase their bad securities. UM, 0:12:04.280 --> 0:12:07.760 he's going to try to force down their throat restructuring 0:12:07.840 --> 0:12:11.880 of of the mortgages the hope for a Homeowners Act. Yeah. Now, 0:12:12.120 --> 0:12:14.040 the big problem with that and what it is is, 0:12:14.080 --> 0:12:20.280 it's it's it's basically congressional support for restructuring loans, knocking 0:12:20.280 --> 0:12:23.240 down the principle, which is pretty radical. You borrow four 0:12:23.320 --> 0:12:25.360 hundred thousand for a house you can't afford it, and 0:12:25.440 --> 0:12:27.440 all of a sudden, we're just gonna pretend like you 0:12:27.480 --> 0:12:30.920 only borrow two hundred thousands. That's huge. The thing is 0:12:30.920 --> 0:12:33.440 is it's it's a it's a voluntary program. I think 0:12:33.520 --> 0:12:36.320 you probably get, like you know, tax rebates or right 0:12:36.360 --> 0:12:39.240 off if you're a company or a lender that engages 0:12:39.280 --> 0:12:42.679 in this um, but you can't force anybody to do it. 0:12:43.000 --> 0:12:47.200 If the US government actually owns your mortgage, chances are 0:12:47.520 --> 0:12:51.679 they're going to be very hesitant about foreclosing on you. 0:12:52.160 --> 0:12:55.719 Number one, that's just a huge pain. But number two, um, 0:12:56.559 --> 0:12:59.880 they actually have a vested interest then to keep you 0:13:00.040 --> 0:13:03.800 in your house, right, Okay, the reason being the if 0:13:03.800 --> 0:13:07.560 they can stem the tide of foreclosures, then the market 0:13:07.600 --> 0:13:10.920 starts to come back up, and these mortgage backed securities 0:13:10.960 --> 0:13:14.240 and mortgages themselves increase in value all of a sudden 0:13:14.240 --> 0:13:16.920 They're worth more and the plan works. Right, So if 0:13:16.960 --> 0:13:20.079 if the government buys your mortgage, you should probably thank 0:13:20.120 --> 0:13:22.599 your lucky stars. Right then this is all This is 0:13:22.640 --> 0:13:25.560 all theoretical. None of it's been put into practice yet, right, 0:13:25.840 --> 0:13:27.320 which is I think why a lot of people are 0:13:27.360 --> 0:13:30.440 kind of nervous about this bail All right, Right, I know, 0:13:30.559 --> 0:13:33.520 I am, I do know that that foreclosures Actually nobody 0:13:33.520 --> 0:13:37.120 wins in foreclosure. It's not like because I did some reason. 0:13:37.160 --> 0:13:38.880 Actually I wrote an article on it last year. And 0:13:39.280 --> 0:13:41.480 it's not like banks foreclosed on people and they're just 0:13:42.960 --> 0:13:45.040 we kick you out of the house. Banks lose money too. 0:13:45.920 --> 0:13:48.760 But you know, like we've mentioned before, the mortgage back 0:13:48.800 --> 0:13:53.000 mortgage backed securities. Sometimes the banks don't even own that house. 0:13:53.400 --> 0:13:55.800 They turn around and sell it to securities and it 0:13:55.800 --> 0:13:58.200 gets fractured off. And so maybe that's kind of where 0:13:58.200 --> 0:13:59.920 the problem is starting. Well, you know who does win 0:14:00.040 --> 0:14:04.240 in a foreclosure. Someone who's renting right now. If you 0:14:04.280 --> 0:14:06.720 are a renter and you don't buy in this in 0:14:06.800 --> 0:14:11.160 this climate, you're you're a total sucker. Yeah, it's probably 0:14:11.200 --> 0:14:13.160 good time to buy. Oh, it's an excellent time to buy. 0:14:13.440 --> 0:14:15.240 It's like a fire sale out there. I've said it before, 0:14:15.240 --> 0:14:17.400 I'll say it again. Get your act together, buddy, get 0:14:17.400 --> 0:14:21.880 in a house. Yeah. Thanks. Okay, So that's not the 0:14:21.920 --> 0:14:24.840 only thing that this this cash car he's going to 0:14:24.880 --> 0:14:27.560 be doing. This guy's got a lot of responsibility. I'm 0:14:27.600 --> 0:14:29.920 not sure he's he knows what he's getting into. And frankly, 0:14:29.920 --> 0:14:31.320 I have to say I find a little fishy that 0:14:31.360 --> 0:14:35.120 Henry Paulson is one of the former high level executive 0:14:35.160 --> 0:14:39.000 at Goldman Sacks and he taps this guy from Goldman Sacks. Yeah, 0:14:39.040 --> 0:14:40.880 and you could say, well, he knows him, he's worked 0:14:40.880 --> 0:14:43.200 with them, he had, he respects him. But I believe 0:14:43.200 --> 0:14:46.760 he already know that. I like one investment bank being 0:14:46.800 --> 0:14:49.080 so entrenched in this bail act. Actually I think he 0:14:49.120 --> 0:14:52.160 actually worked in the office in the Treasury office. Uh, 0:14:52.680 --> 0:14:55.080 he was previously with Goldman Sacks. But you know, I 0:14:55.120 --> 0:14:57.640 know what you mean. I got you his influence. Is 0:14:57.680 --> 0:15:03.240 he like Paulson's protege or something? I don't know. Yeah, Okay, 0:15:03.280 --> 0:15:05.240 So there's other things that cash Car is going to 0:15:05.280 --> 0:15:08.600 be in charge of, like, um, when when the government 0:15:09.520 --> 0:15:13.680 purchases three million dollars or more of bad investments from 0:15:13.840 --> 0:15:19.600 a lender whoever, Um, they're automatically, they automatically take a 0:15:19.720 --> 0:15:25.200 warrant in your company. This is a non voting block 0:15:25.400 --> 0:15:28.640 of shares, just common stock shares, right, And this is 0:15:28.680 --> 0:15:32.360 actually really ingenious, Chuck. You want to tell everybody why, 0:15:33.000 --> 0:15:35.440 Well I don't know why. Let me tell you why. 0:15:35.600 --> 0:15:38.000 All right, You're you're the econ mask. This is straight 0:15:38.000 --> 0:15:42.040 from Coshkari to me to you. Okay, Uh, actually that's 0:15:42.080 --> 0:15:44.320 not true at always should probably cut that part out. 0:15:45.920 --> 0:15:50.320 The reason why it's such an ingenious UH provision is 0:15:50.360 --> 0:15:55.120 because no one has any idea how how to value 0:15:55.200 --> 0:15:58.560 these mortgage backed securities. I read an article with the 0:15:58.600 --> 0:16:01.720 guy who who is like this expert at valuing a 0:16:01.880 --> 0:16:04.840 stock that you found in like your grandfather's closet from 0:16:04.960 --> 0:16:07.720 nineteen twenty three or something. This guy could value. This 0:16:07.760 --> 0:16:11.600 guy and everyone else is totally lost at at properly 0:16:11.720 --> 0:16:14.960 valuing mortgage backed securities and c D e O s 0:16:15.040 --> 0:16:18.360 and and just all these other bad investments. Right, So 0:16:19.400 --> 0:16:22.960 whatever the government, whatever price the government sets to buy 0:16:23.000 --> 0:16:27.720 these at, it could be way too low. So if 0:16:27.760 --> 0:16:30.080 you are a company selling this to the government and 0:16:30.120 --> 0:16:33.560 you end up experiencing a windfall profit from the sale, 0:16:33.840 --> 0:16:36.560 which you're not supposed to be, the government's covered on 0:16:36.600 --> 0:16:39.680 the back side because they own shares in your company. Now, 0:16:40.160 --> 0:16:43.640 so if you experience a profit, your your price per 0:16:43.680 --> 0:16:46.760 share rises, and the government gets something out of it 0:16:46.800 --> 0:16:50.280 because they own those shapes, and in theory, ultimately the taxpayer, 0:16:50.440 --> 0:16:52.800 it would come back to us. I'm not holding their breath, 0:16:52.880 --> 0:16:55.880 but what we want is for this bailout to work. Yeah, 0:16:55.960 --> 0:16:58.080 and and technically it could work. I mean, if you 0:16:58.120 --> 0:17:00.680 think about it, right, If the government meant buys up 0:17:00.760 --> 0:17:04.919 seven hundred billion dollars worth worth of mortgage backed securities 0:17:05.000 --> 0:17:07.080 or mortgages or whatever, and all of a sudden the 0:17:07.160 --> 0:17:09.800 market stabilizes because of it, and maybe over the course 0:17:09.840 --> 0:17:12.399 of a couple of years, maybe a decade, who knows, 0:17:12.640 --> 0:17:16.120 the market comes back into full swing. These things don't 0:17:16.160 --> 0:17:18.439 just disappear. They don't just vanish. The government is not 0:17:18.480 --> 0:17:21.680 going to take these these securities and throw them in 0:17:21.720 --> 0:17:24.199 a furnace. They're gonna sit on them. Basically, I think 0:17:24.240 --> 0:17:26.800 it's Bush put it there. The the U. S. Government's 0:17:26.840 --> 0:17:29.720 the only institution large enough to buy these and sit 0:17:29.800 --> 0:17:32.480 on them for a while. Um And then once the 0:17:32.520 --> 0:17:35.560 marketiz it's these things increase in value when the government 0:17:35.600 --> 0:17:38.399 sells them. And and if they sell them well and 0:17:38.480 --> 0:17:42.560 not flood the market with these things, then we should 0:17:42.600 --> 0:17:46.760 as taxpayers see a windfall from that. I mean, even 0:17:47.000 --> 0:17:49.680 if if the combined value of all these things double, 0:17:49.720 --> 0:17:51.879 then not all of them are worthless. There are some 0:17:51.960 --> 0:17:54.240 good mortgage backed securities out there still, but they just 0:17:54.280 --> 0:17:56.640 have a bad name and no one wants them when 0:17:56.640 --> 0:17:58.960 they increase in value. I mean, even if they double, 0:17:59.040 --> 0:18:03.879 that's one point four trillion dollars from from the sale. Uh, 0:18:04.000 --> 0:18:06.359 and half of that being pure profit. That would be 0:18:06.400 --> 0:18:09.080 pretty good. It was whether that happens or not, it 0:18:09.119 --> 0:18:11.680 remains to be seen. You know, what I think would 0:18:11.720 --> 0:18:13.880 be interesting as if all of a sudden they put 0:18:13.880 --> 0:18:17.000 out this big plan. Buch says, we're the only people 0:18:17.119 --> 0:18:19.679 institution big enough to do this, and all of a sudden, 0:18:19.680 --> 0:18:21.880 like Bill Gates and Warren Buffetts stroll up behind him 0:18:21.880 --> 0:18:24.920 and say, not so fast, We've got our own plan, 0:18:25.160 --> 0:18:28.000 and they just bought up, you know, eight hundred billion 0:18:28.040 --> 0:18:31.159 dollars worth of bad investments. Well, Warren Buffett has been 0:18:31.200 --> 0:18:34.080 on a buying spree right now. Of course, it's not 0:18:34.160 --> 0:18:36.280 just it's not just a good time to buy a 0:18:36.400 --> 0:18:38.520 house or for closed house. It's a good time to 0:18:38.560 --> 0:18:41.919 buy stocks. Yeah. So again, it's like fire sale out there. 0:18:41.920 --> 0:18:45.120 It's crazy. But yeah, apparently from what I understand from 0:18:45.119 --> 0:18:50.360 watching the recent second presidential debate is that Obama may 0:18:50.600 --> 0:18:54.120 tap Warren Buffett for Treasury secretary. You know, I would 0:18:54.160 --> 0:18:58.520 be all for it. It makes a lot of sense. Yeah. So, uh, 0:18:58.640 --> 0:19:02.320 anything else in this provision, maybe of the Golden parachute. Yeah, 0:19:02.359 --> 0:19:04.080 that's the one thing that I know probably made a 0:19:04.119 --> 0:19:06.040 lot of people feel a little bit better. Is the 0:19:06.040 --> 0:19:08.680 gold the famous golden parachute. A lot of times when 0:19:08.720 --> 0:19:12.440 companies go under, like the big end run thing, you remember, 0:19:12.560 --> 0:19:15.040 the executives are the ones that come out on top 0:19:15.119 --> 0:19:17.800 and the investors lose all their money. These executives get 0:19:17.840 --> 0:19:20.040 these huge payouts at the end and just kind of 0:19:20.040 --> 0:19:22.119 sneak out the back door and buy their island and 0:19:22.280 --> 0:19:25.199 you know in the in Bermuda and uh, I know 0:19:25.280 --> 0:19:30.240 this calls for no golden parachutes. Um, these big multimillion 0:19:30.280 --> 0:19:34.000 dollar severance packages are not gonna happen. No, and specifically 0:19:34.640 --> 0:19:39.640 your top five executives. Any any salary over five grand 0:19:39.680 --> 0:19:44.199 can't be deducted as an expense um. So that in 0:19:44.359 --> 0:19:47.200 theory should limit companies from doing it. There's some problems 0:19:47.200 --> 0:19:50.640 with that, though, what's that that's just your top five executives. 0:19:51.400 --> 0:19:54.680 Another problem with it is that the cap there's already 0:19:54.720 --> 0:19:57.280 a cap that exists, but it's a one million. You 0:19:57.320 --> 0:20:01.240 can't you can't deduct any salary over one million. So really, 0:20:01.640 --> 0:20:04.240 for a major company, all it's gonna be is two 0:20:04.240 --> 0:20:07.320 point five million and lost deductions, which is nothing. A 0:20:07.480 --> 0:20:11.200 second problem The other problem, this is the biggest problem. 0:20:11.240 --> 0:20:14.800 There is no provision in the Golden Parachute clause of 0:20:14.840 --> 0:20:19.040 this law, the bailout bill UM that says anything about 0:20:19.080 --> 0:20:22.320 stock options. So think about it. You let a you 0:20:22.440 --> 0:20:25.120 let an outgoing ceo go, You're like you, you did 0:20:25.119 --> 0:20:27.919 a terrible job managing. But here, take all these stock options, right, 0:20:28.000 --> 0:20:30.800 We're going to value them at today's terrible market price. 0:20:31.400 --> 0:20:33.240 Just hold off a couple of years. The market is 0:20:33.240 --> 0:20:36.480 gonna come back and you you cash in your options 0:20:36.880 --> 0:20:41.679 and you're you're just richer than an astronaut. Right that 0:20:41.840 --> 0:20:43.520 that's I'm glad you said that, because I didn't even 0:20:43.520 --> 0:20:45.240 know that. But that's what I was just about to say, 0:20:45.320 --> 0:20:47.439 is the way these guys operate, I had a feeling 0:20:47.480 --> 0:20:50.480 there's there's always some back door where they get there's yeah, 0:20:50.520 --> 0:20:52.760 and and they will There's not gonna be any way 0:20:52.880 --> 0:20:56.359 of going around it. The the only thing I think, uh, 0:20:56.400 --> 0:20:59.199 that that we can hope for is that there should 0:20:59.200 --> 0:21:05.680 be widespread investigation and probably you know, criminal lawsuits against 0:21:05.680 --> 0:21:07.960 a lot of the people who are running the show. Yeah, 0:21:08.000 --> 0:21:10.359 I think this will be under the microscope more than 0:21:10.440 --> 0:21:13.520 other little quieter bills that go through so I think 0:21:13.520 --> 0:21:15.840 so too. So if you want to know anything more 0:21:15.880 --> 0:21:19.639 about this, I would strongly recommend you exercise your civic 0:21:19.720 --> 0:21:23.000 duty and read how will the government spend the seven 0:21:23.040 --> 0:21:26.400 hundred billion dollar bailout funds? On how stuff works dot 0:21:26.400 --> 0:21:28.879 com and stick around to find out one more reason 0:21:28.920 --> 0:21:32.119 why you shouldn't wear a bluetooth headset. But first chuck 0:21:32.200 --> 0:21:35.639 a message from our sponsor, Josh. What's the first reason 0:21:35.760 --> 0:21:37.639 that you shouldn't wear a bluetooth headset? I know you 0:21:37.680 --> 0:21:40.480 don't like the way awkward fashioned. Look, I'm just gonna 0:21:40.480 --> 0:21:42.360 say it. It's my personal opinion. I know a lot 0:21:42.359 --> 0:21:45.240 of people like your style right out of the Preppy Handbook, 0:21:45.320 --> 0:21:47.440 if I may say so, I do my best, which 0:21:47.480 --> 0:21:49.320 is good. This is a good book. My sister used 0:21:49.320 --> 0:21:51.359 to have that when I was growing too. Yeah, I 0:21:51.400 --> 0:21:52.840 did you really? Yeah? I used to read it on 0:21:52.880 --> 0:21:55.240 the john. It's very cool. It's a cool book, if 0:21:55.280 --> 0:21:57.760 I remember correctly. She also had how to speak like 0:21:57.760 --> 0:22:00.800