Okay, since neither of you like the Martial Law suggestion, how about this one. People who didn't vote for the bail-out the first time, were called and/or e-mailed with the following message (or something similar,) "This is so-and-so, I met you at a fund raiser for--insert candidate's nsme--. I understand you're reluctant to vote to pass the current fix to the financial mess we're in. Yes, that's right, it's a matter of public record. Um-hum...Yes...I understand and I agree with you...Yes I do.

"Hey, I have an idea. You know that project you're tried to get ear funding for? How about if we get it added to the financial fix, would you vote for it then? No. Wait, this is all perfectly legal! No, it isn't a bribe, believe me. I have the President's word on that. We'll get right on it. Yes.

"And thank you so much. With your vote we stand a chance to stave off the worst financial crises in 60 years, and you'll get your project approved. Yes, yes. You'll probably win your electection, won't you!

"That's quite alright, You're welcome very much. Yes. I need to go to bed now. Good night."

*click*

thanks liz,

no, I didn't forget leveraging, just the level of debate I received back from my post was so banal and puerile that I didn't bother to elaborate on the subtlety of leveraging.

You have, correctly, pointed out that one of the practices that has landed us in this mess was borrowing to buy something that was depreciating or reducing in value. This practice ignored the reality that the borrowed money had to be paid back. Further, if the shares bought using money on loan are then sold, technically, that sale was of shares that were not owned by the seller but owned by the bank. Did the banks know or care? The ’87 meltdown which led to the last global recession was caused by just this practice. Banks then charged us all higher interest rates for 10 – 15 years to repay those losses. Again, the “little people” pay for the sins of the greedy.

And kudos to your moderate and thoughtful approach – nice to see some balance in these posts, finally.

I agree in a qualified way, it was the banks and the "trained" experts were either stupid or greedy because they said that people who would not normally have qualified for a loan could have the money. Look up the definition of "low-doc" and "non-conforming" loans and get back to me. The homeowners who you say could afford the mortgages (which, by definition, they couldn't afford from what has happened, even if you say they could but that leads into the area of "honeymoon rates" and a whole other discussion) must have had a lot of medical bills all at once. Anyway to make you happy, I'll add "sick" to my list of stupid, greedy and criminal.

BTW, your Congressional hearings just found that the head of Lehmann bank was paid (not earned) USD$0.5B in the last 7 years. That's $500,000,000 US!. Not bad for stuffing up a company. I should go to the US and get paid half-a-Billion to ruin a bank instead of getting my current salary for doing a good job.

Just a small technical point...those shares WERE NOT owned by the bank unless they were put up as collateral against the loan and the bank had a lein on the shares as a result. Even then, they would not have been owned by the bank unless the loan was defaulted upon and the collateral was seized.

Leverage isn't always bad.

Let's remember what leverage is. If, for example, I want to buy $10,000 worth of common stock amd I have the money to pay that amount for the stock, but I choose not to do so. Instead, I borrow $5,000, add it to $5,000 of my money, and buy $10,000 worth of stock. I've leveraged my buying power, which is fine, by a small margin. I'm betting that my stock will go up sufficient to allow me to sell it at a high enough price to pay off my loan (plus interest,) my broker and myself. If the stock goes down, I'll pay off my loan, because I have the money to do so, and hang on to the stock until it goes back up again.

One of the many things that's happened in the financial industry is that it's leveraged far beyond its cash flow. Its financial leverage ratio was much higher than 2:1 because it was looking for higher profits. It may have worked, except that too many people had ARMs. As the mortgage lenders started to lose money because their cash flow was drying up due to leveraging, they bumped the interest rates on those ARMs up at renewal time, which led to defaults, which led to upper level bankruptcies.

I believe there used to be a reg that imposed a cap on the amount of money a company could borrow in order to leverage their buying power--or at least imposed a cap on the ratio. This must be one of the regs that was either thrown out or ignored by the financial industries in its efforts to make more and more profit. But more and more profit was goaded by investors who wanted more and more profit and in order to attract more and more investors.

Now, the bubble has burst.