Topic: POLL: Financial Bailout -- Is it necesarry? (Read 6612 times)

JimH · « **on:** September 29, 2008, 04:15:51 pm »

The U. S. House tried and failed today to pass a $700 billion bailout package. It supposedly had bi-partisian support, but about 1/3 of Democrats and 2/3 of Republicans voted no. Should they pass it? Or something like it?

BTW, I watched Network last night, a 1976 movie about the erosion of network news. People are yelling "I'm mad as Hell and I'm not going to take it anymore" out their windows. What goes around comes around.

gappie · « **Reply #1 on:** September 29, 2008, 04:32:27 pm »

american politics are a mistery to me. ?

bought that movie some weeks ago.. great role from fay dunaway. i love the pace of movies from the seventies.

DarkPenguin · « **Reply #2 on:** September 29, 2008, 05:22:09 pm »

Quote from: JimH on September 29, 2008, 04:15:51 pm

BTW, I watched Network last night, a 1976 movie about the erosion of network news. People are yelling "I'm mad as Hell and I'm not going to take it anymore" out their windows. What goes around comes around.

My favorite movie. (Well, maybe second to Dr. Strangelove.)

rjm · « **Reply #3 on:** September 29, 2008, 05:51:24 pm »

Thanks for the tip, I'll rent Network tonight.

The fundamental problem is that overpriced assets were recklessly leveraged and loans were made to people that could not afford the assets. This imbalance must eventually correct. The $700B will delay the day of reckoning but will not prevent it. So the choice is to punish now the shareholders of the companies that took reckless risks, or delay the punishment with $700B and then punish both the taxpayer and the shareholders.

I think talk about the taxpayer eventually recovering their $700B is nonsense. It will devalue the US $ which will make energy even more expensive than that already being caused by China's demand. Long term high energy costs mean that the economy will never recover to the level we saw over the last decade.

steveklein · « **Reply #4 on:** September 30, 2008, 07:18:53 pm »

unfortunately, something has to be done or the economy will come crashing down.

i hope people who think clinto's policies were so great for the economy understand the situation we are in came as a result from the clinton administration pressuring banks to loan money to people who had no business owning homes.

let's just hope this is not a trend (corporate bailouts). i think it would be a terrible idea to bail out the airlines, and the detroit motor companies. these are simply failing companies that could use a little construction by destruction imo.

if we always bailed out failing companies, we'd still have telegraph companies that wouldn't have any reason to develop telephone service, etc etc.

Matt · « **Reply #5 on:** September 30, 2008, 07:59:47 pm »

I believe Sarah Palin put it best:

Quote

That’s why I say I, like every American I’m speaking with, we’re ill about this position that we have been put in where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up our economy, helping the — it’s got to be all about job creation too, shoring up our economy and putting it back on the right track. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions and tax relief for Americans and trade — we’ve got to see trade as opportunity, not as competitive, scary thing, but one in five jobs being created in the trade sector today — we’ve got to look at that as more opportunity. All those things under the umbrella of job creation. This bailout is a part of that.

craigmcg · « **Reply #6 on:** October 01, 2008, 05:40:24 am »

As a Canadian, my view of government's role seems to be further left than the commonly portrayed US view. I think that the government is there to provide services to the people (health care, etc.) and to regulate business/industry to ensure public safety, whether physical or fiscal. This hasn't always been done here as well as many of us would like but our failures have been far less catastrophic than yours (Enron, the current mess, etc.). Greed and corruption seem to be at the heart of any such failures; government profits from business/industry by making changes or removing regulations to benefit business/industry while the people pay the price.

Yes, something definitely needs to be done but I think that the bailout should assist the people to not lose their homes and that regulations be put on the financial sector to reduce the likelihood of this happening again.

raldo · « **Reply #7 on:** October 01, 2008, 08:46:56 am »

Quote from: craigmcg on October 01, 2008, 05:40:24 am

As a Canadian, my view of government's role seems to be further left than the commonly portrayed US view. I think that the government is there to provide services to the people (health care, etc.) and to regulate business/industry to ensure public safety, whether physical or fiscal. This hasn't always been done here as well as many of us would like but our failures have been far less catastrophic than yours (Enron, the current mess, etc.). Greed and corruption seem to be at the heart of any such failures; government profits from business/industry by making changes or removing regulations to benefit business/industry while the people pay the price.
[...]

Well, some argue that the crisis was caused by government intervention in the market in the first place. And now the government must fix the situation by using taxpayers' money!

Check out the following Freakonomics blog article which tries to explain the causes and effects of the crisis:

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

Qythyx · « **Reply #8 on:** October 01, 2008, 06:19:43 pm »

I think the right answer to the poll is not listed as an option: yes, the congress does need to do something significant to resolve the current crisis, but the current bill in not what needs to be done.

So, what does need to be done? Well, 2 major problems need to be addressed.

1. Housing prices have fallen significantly (17% in the last 1 to 2 years) such that there are more than 10million mortgages out there where the value of the mortgage is higher than the current value of the house. This, in tandem with the fact that house mortgage loans are special in that the loaning entity is not allowed to go after the homeowners other assets in the case that they default on the loan, means that homeowners in this situation have a large incentive to abandon the house and mortgage. The effect of this is the lending institution takes a loss and the abandoned home drives the prices of nearby homes even lower, accelerating the downward spiral.

2. Because so many lending institutions are facing ever increasing losses (see #1 above) they are both becoming much more conservative in their lending polcies to all parties, individuals as well as other institutions, and they are being considered as much more risky when they try to get loans from other institutions. This has the effect of causing them to have less cash on hand than they need if/when asset holders try to withdraw their assets. This causes the illusion that the institution doesn't have enough worth to cover their owed debts when it is really just a short term cash flow issue. AIG is a great example of this since they have (had?) over 1trillion (with a T) dollars in assets but because of cash flow they were deemed unstable.

So, whatever play the congress puts into place should address both of these. One of my problems with the current plan is that it proposes to address the first problem by buying out or backstopping the bad mortgages such that the lending institutions don't take hit if/when the borrowers foreclose. The problem is that this plan only directly helps those institutions and does nothing to directly help the borrowers. It does indirectly help the borrowers in that it is supposed to help prevent further erosion in home values, but that's littel relief to someone who can't pay their mortgage. I should also say that I do have somewhat limited sympathy for these homeowners who borrowed more than they can afford, but because the lending institutions were so aggressive in creating those loans (with difficult to understand fine print) I do have some sympathy.

jagdriver · « **Reply #9 on:** October 03, 2008, 10:29:03 am »

I'm just not sure. Too little, too fast, I think, after listening to a George Soros interview on NPR this morning. I like the idea, presently being bandied about, that those who can afford their home payments get to refinance at 5-1/2% on a 30-year FRM. That shpouls have been included in the package, then I would not be vascillating so much. Simply bending over and taking the hit for the sub-prime debacle, while the Wall Street fat cats make travel arrangements to their third and fourth vacation homes (do they know how many they own) by way of their crewed yachts, doesn't sit well with me this morning.

hit_ny · « **Reply #10 on:** October 03, 2008, 01:51:10 pm »

It is done!

What happens now ?

rjm · « **Reply #11 on:** October 03, 2008, 03:49:07 pm »

Fill up your gas tank now. Here's why:

http://www.wordpress.peakmoment.tv/conversations/?p=218

Matthew Simmons is the CEO of a respected investment bank. He is not a flakey tree hugger.

AustinBike · « **Reply #12 on:** October 04, 2008, 07:24:55 am »

So, let's correct a misconception. This is not about Bill Clinton. If you want to place the blame, the blame lands squarely on the deregulation crowd. See, I did that all by myself without aligning it to a political party.

Those that believe that we should "get government out of our lives" essentially stripped all of the sefeguards that could have prevented *some* of this from happening.

The other people who are responsible for this are those that borrowed more than they were capable of paying off. That is where the defaults come from.

If we want to truly fix this, there are some simple, yet painful things that we need to do:

1. Fix the bankruptcy laws. We removed the ability to for many citizens to go into bankruptcy. Why are we bailing out large coroporations who are the beneficiaries of this new tightening of the laws yet allowing the credit card companies to screw people?

2. Let the banks fail. "The market will sort it out". Don't like regulation? Great, let's really let it run the full course. If markets are allowed to correct things, they will. The weak banks will be bought out by fewer larger banks. Bad in the short term, but in the long term new competition will come up to fill the gaps the larger ones leave. We are just impatient. Why are we bailing out the people who can't run a business?

3. CEO compensation. Not for everyone, but for industries where things are out of control. Why are we bailing out big banks where CEOs had $100M+ compensation just a year ago?

4. Payback. Let's go after the $100M compensation folks. If the management of XYZ bank drove it into bankruptcy we need to find the folks responsible. Let's take some of that money back. Why do I have to pay $2K for a problem I didn't create? Even if it only reduces my cut to $1980 I still believe it is worthwhile. If people believe they can get away with this, it will continue.

5. Criminal charges. If they are deserved they should be handed out. The FBI should be all over this one.

6. People need to lose some houses. How do you convince people not to get loans they can't afford? By giving them a penalty. Yes I feel bad that someone is hurting because they lost their house. Why do I have to pay for that? I was responsible.

7. Let the economy suffer. I have taken a tremendous hit in my portfolio. It will come back. It always does. That is the only way that we can get through this. If you bail out the market, you *may* solve the problem. If you don't bail out the market, it will eventually sort itself out. A painful reminder will keep us from touching the hot stove again in the future.

8. Lobbying reform. The reason the regulations were broken down is because the banks lobbied to get the rules eased. Let's face it folks, this is a large part of the problem. Millions being fed to government officials to make it easier for people to get us into these messes.

9. Leave FDIC alone. There is a $100K limit today. Both pres candidates want to push that guarantee to $250K. Yeah, that helps the small guy not the rich guy. "It helps small businesses." Ask J River how much cash they have in the bank. Small businesses don't have $100K in the bank. Anyone smart enough to have $250K to throw around is smart enough to know that they can put it in 3 accounts to get full coverage.

10. Loans, not bailouts. Give $500M to bail out an investment back? It's a loan. They pay it back. End of story. We will bail these guys out and 3 years later all will be fine. Business will be good, shareholders will be getting dividends and big bonuses will be back. And the taxpayer is out the money. Not fair. If you can take money you can pay it back - with interest. They know what interest is, trust me.

11. Taxpayers get something out of it. If we are bailing you out, we are going to take an interest, AHEAD of shareholders and bond holders. We get paid first. Share/bond holders don't like it? Fine, let the bank fail. This is not a charity, it is business. If you want us to save you, we get first crack at profits.

12. Bonuses. All employee bonuses (all the way up to CEO) are suspended until the bank has paid off the bailout. End of discussion. "But we'll lose all of the good employees"! Yeah, the ones that got you into this mess. You all profited, that game is over.

We all need to grow up and take some responsibility for this all the way around.

Then we need to fire all of the politicians that got us into this. On both sides.

vbrook · « **Reply #13 on:** October 04, 2008, 09:32:53 am »

Well, to be perfectly frank---because I can on the Internet---I just don't feel particularly affected either way, personally. I'm comfortable, that won't go away, and I couldn't care less if bankers are crying.

HOWEVER----BIG LESSON/ILLUSTRATION: The extent to which the "rich" have control over the poor.

I think the level of wealth discrepancy in the US is bad, and it's immoral. No amount of regulations can suffice for the cultural changes that are truely needed. I agree with the Canadian who posted elsewhere in this thread.

Do you also realise, most people in America actually live under dictatorship? Think about it for a second: during their VITAL, WAKING HOURS comprising 90% of their adult lives, most Americans live under a dictatorship. They do not have freedom of speech. Their schedule is highly regimented. They take orders from above. They live in a society of secrecy. Even what they wear is dictated to them.

It's called "US companies".

Sure, the workers can leave, but, lets be honest, most companies have worked hard to make that difficult----strong disincentives including loss of healthcare and pension.

The US would be much better off if they took away the "control" corporations have over other people's lives.

Everyone should be in the same boat is me---or maybe others here: What you do, you do because you enjoy it. You don't do what you do out of fear of reprisal.

If corporate "control" were gone, then US companies and the economy as a whole would be a lot better off. Healthcare and other vital things----it should be illegal for corporations to use them as a tool of control.

JimH · « **Reply #14 on:** October 04, 2008, 06:43:47 pm »

Quote from: vbrook on October 04, 2008, 09:32:53 am

Do you also realise, most people in America actually live under dictatorship? Think about it for a second: during their VITAL, WAKING HOURS comprising 90% of their adult lives, most Americans live under a dictatorship. They do not have freedom of speech. Their schedule is highly regimented. They take orders from above. They live in a society of secrecy. Even what they wear is dictated to them.

It's called "US companies".

Sorry, but I think you're smoking your socks. As the owner of a U.S. Company, my supposed "dictatorship" rights are trampled upon daily, with great glee.

ADDiCT · « **Reply #15 on:** October 05, 2008, 02:20:52 am »

I think vbrook was talking about really large companies, trusts or corporations (as in "corporate america"). In that context, his statments are quite true indeed.

Anyway, no matter if US taxpayers want to bail out the greedy idiots (which are getting high salaries and bonuses even though they made big mistakes) or not, they will have to pay bigtime. There's elections soon, and politics "have to do something", even if it is just a temporary remedy (which the current plan is). What's really funny is that the incarnation of capitalism the US is or has been embracing is all about the "market", with little or no political interference from the government. But all of a sudden, the government feels the need to interfere, which is quite odd if you think about it.

I've been telling friends for some years now that i strongly believe we could see the end of capitalism as we know it. Many of us have seen one huge political/economical system (you can't divide these two aspects, they always go hand in hand) collapse very quickly, and there's no reason why this shouldn't happen again. Banks are the basis of our current system, and this basis is collapsing in countries around the globe (US, Asia, Europe, etc.). Actions like the current one in the US can only have short-time effects, they won't solve any basic problems.

hit_ny · « **Reply #16 on:** October 05, 2008, 12:34:41 pm »

Quote from: AustinBike on October 04, 2008, 07:24:55 am

Those that believe that we should "get government out of our lives" essentially stripped all of the sefeguards that could have prevented *some* of this from happening.

Sure but do you support the converse, that we NEED govt 'somewhere'..

..better make that 'somewhere' here, there, over there, you know, for more 'security'

Cos I bet thats what bureaucrats the world over are going to champion now and bet they will go overboard with it

You can't trust too much that 'free market' no more !

Its the end of an era, Thatcherism, Reganism, do so wish things had not come to such a pass

The necessity of this bailout has made the chance of a democrat in the whitehouse a near certainty IMO.

No electorate will forgive any incumbent govt for this regardless of involvement.

Having said that if 'cows can fly' im not sure whether to laugh or cry ?

AustinBike · « **Reply #17 on:** October 05, 2008, 03:22:46 pm »

We simply need some control somewhere. Letting the market run everything is not good because the rich just get richer. Letting the government run everything is no good because it kills the growth.

There has to be a middle ground.

We went too far in one direction and we need to correct things.

ADDiCT · « **Reply #18 on:** October 05, 2008, 04:04:22 pm »

The question is if the people that had all benefit from this extreme form of capitalism can be persuaded to give away some of their riches. I highly doubt they will do that out of their own free will. It's all a matter of perspective, after all - if you've made a fortune during the last years, you'll want the system to stay the same, obviously.

Btw, many countries in europe were employing a system called "social market economy". It's a system that tries to balance between "the money", "the people" and other factors, controlled by the government. It used to work quite well, as far as i can tell, but it slowly and silently tranformed into what some people call "turbo capitalism", and what i believe is the source of the current problems worldwide. The transformation was pushed by the governments, and the reasoning was always "we have to go with globalization, in order to stay competitive on the global market".

As we can see, there is no motivation at all to "switch systems", or correct things. Politicians just try to plug holes, so i looks like they're doing something. It will take a _real_ catastrophy to change people's minds.

AustinBike · « **Reply #19 on:** October 05, 2008, 05:25:56 pm »

Anybody notice that nobody cares about war anymore?

And nodody cares about terrorism anymore?

Immigration? Crickets.

All of the issues that were soooooo important are no longer an issue. the politicians and the media love a good scare tactic. For politicians it allows them to show they are "doing something" for you. The media loves it because it gets people glued to their TVs.

I wonder what would have happened if we had done nothing. In my mind the "crisis" is just as much something pushed on us by the politicians than anything else.

Is it really fixed?

Is it really over?

John Gateley · « **Reply #20 on:** October 05, 2008, 06:21:36 pm »

Quote from: AustinBike on October 05, 2008, 05:25:56 pm

I wonder what would have happened if we had done nothing. In my mind the "crisis" is just as much something pushed on us by the politicians than anything else.

I don't think so: I've sold my home twice in the past 2 years, both times were painful. My 401K is also reflecting the bad economy. My wife, a freelancer, has seen her work dry up over the past year.

War is a distant foreign country, it is not touching my day-to-day life. Immigration is closer, but doesn't affect me personally, at least not in a visible immediate way. The bad economy, however, makes itself known to me at least daily.

I doubt it is fixed or over, though we can hope.

j

AustinBike · « **Reply #21 on:** October 05, 2008, 07:22:39 pm »

I am not saying that the economy is not in a shambles right now.

Simply saying that we went from "tough economy" to "you HAVE to do this thing right now or it will be the end of the world." The way the original pitch was made (give us $700B but you can't ask any questions) made me very suspect of the whole thing.

I have lost a ton in my portfolio so I feel the pain. Just not sure that the bailout will change anything other than reward bad behavior.

vbrook · « **Reply #22 on:** October 09, 2008, 09:39:23 am »

Jim,

As the other poster rectified (thanks), I was referring to "corporate America". It's a meaningless term but it also means something at the same time.

I'm not saying there aren't a lot of well-run, excellent, small- and medium-sized businesses; and, I admit some big ones are well run. But, they're not the companies causing problems.

If "corporate America", and in that a relatively small group of individuals, are to hold great power over their hundreds of thousands (millions?) of workers, then those small group of individuals should be help personally and criminally liable for their actions. That seems fair.

What would make more sense, I think, is completely decoupling the social services/benefits mix from "big business". This would eliminate the "big business" ball-and-chain, employee "motivation" and retention strategy.

On the another note, the news of the AIG 'spa weekend' was absolutely amazing. Contrast it with the level of supervision and control the government exerts over the peanuts it supplies for its welfare program. Misspending welfare money is a crime. People have gone to jail for it.

The level of inequity is getting too big for the US to sustain, I think.

Personally, I used to work in an aspect of the financial sector that I feel is a leading driver of inequality. I became increasingly uncomfortable with it, and left.

I'd rather run a small business, and maybe I might.

Quote from: JimH on October 04, 2008, 06:43:47 pm

Sorry, but I think you're smoking your socks. As the owner of a U.S. Company, my supposed "dictatorship" rights are trampled upon daily, with great glee.

raldo · « **Reply #23 on:** October 09, 2008, 11:27:24 am »

Quote from: vbrook on October 09, 2008, 09:39:23 am

[...]
If "corporate America", and in that a relatively small group of individuals, are to hold great power over their hundreds of thousands (millions?) of workers, then those small group of individuals should be help personally and criminally liable for their actions. That seems fair.
[...]

The operational management of large, medium and small sized public companies reports to the board which again reports to the owners. The owners are, of course those who owns stock in a company. Thus, *most* of the "behavior" of operational management is governed by contractual law. And that's the way it should be.

Benefits can be viewed as a part of the total wage package of each employee. As such, the relationship between employee and employer is mutually beneficial since there is no force involved.

-------------

The current situation in the US economy has two sides to it:

(1) There has been substantial government intervention in the market. As a matter of fact, the US financial markets are a lot more regulated than many of the welfare governments which are mentioned above in the thread.

First, the US governments have kept interest rates for risk loans low. These loans are called subprime loans which are the source of the current problems. Second, the risk of these loans have been really low because of government guarantees.

Historically, Fannie Mae was created by the government as a "social" bank with a strong government influence. Later, Freddy Mac was started, to keep up some kind of "competition".

Asy you may know, subprime loans are carried mostly by these two banks.

(2) The private banks repackaged these loans and sold them on. Thus, in a low risk market with little transparency, a meltdown was inevitable.

---------------

In a previous post I recommended the following Freakonomics blog article which deals with this:

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

vbrook · « **Reply #24 on:** October 09, 2008, 01:17:52 pm »

Quote from: raldo on October 09, 2008, 11:27:24 am

The operational management of large, medium and small sized public companies reports to the board which again reports to the owners. The owners are, of course those who owns stock in a company. Thus, *most* of the "behavior" of operational management is governed by contractual law. And that's the way it should be.

That's a fact, and that's how it works, sure, the relationship between the board, the owners, and the c-suite. It's relatively meaningless, in reality, to the vast swath of employees---and, actually, I think there's nothing necessarily wrong with that.

Looking at the wider economy, the three parties under the relationship, in some ways, each and sometime together, resemble a union. For example, the small pool of "top US CEOs", they behave like a union and create the same problems that unions sometimes do. We're seeing that now, big time, I would argue.

Quote

Benefits can be viewed as a part of the total wage package of each employee.

With all due respect, is that from an HR manual somewhere?

I really believe that people should not be relying on employers in order to meet "life necessities." It puts too much responsibility on the people running the businesses. Continuous healthcare needs to be provided regardless of employment status. Same for old-age/end-of-life care. Also provided should be GOOD (but BASIC) housing, GOOD (but BASIC and NOT junk) food, post-secondary/university education if desired.

Do you realise that a lot of companies use basic health care as an "incentive" to work for them? Then, if the employee is terminated, they suddenly have no health care, and sometimes, literally, no decent place to live? If you met such people, I'm sure you'd find the situation as disgusting and as unpalatable as I do. And, sure there are shelters, yep. But, have you seen many? I've seen a couple. They're disgusting.

I would also argue that if businesses don't have to concern themselves with providing healthcare and such other necessities, they'd be better of. Taxes might go up for some of them, but costs related to providing healthcare access (and they are significant) would go down. Most importantly, the labour market would be more efficient. Much more efficient; ultimately.

Quote

As a matter of fact, the US financial markets are a lot more regulated than many of the welfare governments which are mentioned above in the thread.

With all due respect, that's not necessarily a matter of fact. Actually, regulation doesn't quantify, so we can't say "more" or "less". Besides, it's one thing to say, for example, that Iceland's heart is in the right place. I don't think anyone would claim that they have the right system in place. Two very different things.

Now, a better word for regulation is safeguard, I think. One question is, are the safeguards in place doing any good? The other question is, are the philosophical assumptions and drivers behind the safeguards any good?

Going back to the original question:

1) I have to agree that the bailout is probably necessary. I don't think there's enough oversight around how the money is spent. However, I don't think it's possible to provide the oversight necessary.

2) Something needs to change. The 'bailout' has precipitated a very big social problem related to inequality, and it needs to be addressed in a very big way.

raldo · « **Reply #25 on:** October 09, 2008, 03:54:06 pm »

Quote from: vbrook on October 09, 2008, 01:17:52 pm

[..]
With all due respect, is that from an HR manual somewhere?
[..]

No, no, you can find this in any economics textbook under "theory of value".

Quote from: vbrook on October 09, 2008, 01:17:52 pm

[..]
Actually, regulation doesn't quantify, so we can't say "more" or "less". Besides, it's one thing to say, for example, that Iceland's heart is in the right place. I don't think anyone would claim that they have the right system in place. Two very different things.
[..]

Yes, you *can* quantify regulation! Just look at the number of characters in, for example, the Community Reinvestment Act

(http://en.wikipedia.org/wiki/Community_Reinvestment_Act). Most European countries have no such thing. It is exactly the opposite of a rule based central bank system (Germany, Norway, Sweden, etc.). A rule based banking system leads to a more free economy because it limits the scope of what the government can do.

(By the way, Iceland only has 250 000 citizens and all three of it's major banks, Glitnir, Kaupthing and Landsbanki are now shut off from trade. The Icelandic stockexchange is closed until monday because of this. I.e. Icelands economy was very sensitive to this particular kind of crisis).

Which brings us back to the original question. I was pro a bailout. It's an unfortunate situation, brought on by the government, and now the taxpayers must pay. If there is no such action, the recession may drag on, like it did in the thirties...

vbrook · « **Reply #26 on:** October 09, 2008, 08:10:43 pm »

We're not disagreeing, we're just talking at cross-purposes.

Yes to the bailout, unfortunately.

With everything happening, I'm saying that now is getting to be a golden opporunity to the raise the bar in terms of poverty in the US and other rich countries. People made "good"and forceful arguements pro-child labour back in the day; hard to imagine. Now, it's inconceivable in rich countries. That same thing needs to happen with regard to healthcare, housing, and food.

It's the 21st century.

Quote from: raldo on October 09, 2008, 03:54:06 pm

Which brings us back to the original question. I was pro a bailout. It's an unfortunate situation, brought on by the government, and now the taxpayers must pay. If there is no such action, the recession may drag on, like it did in the thirties...

AustinBike · « **Reply #27 on:** October 11, 2008, 09:17:44 am »

The best description of this mess is that this is a situation where we privitized profits and socialized risk.

Matchbox · « **Reply #28 on:** October 11, 2008, 12:22:47 pm »

Depression 2008 - Your Government Screwed You Again…and are now demanding more power to ruin our economic lives.

The current housing economic meltdown is the direct result of govt intervention gone bad (as always). The lenders were doing as they were forced to do by the federal government. Why does everyone ignore the obvious? Your govt screwed you yet again, and instead of blaming them, you stick your heads in the sand and blame the “fat cats”.

This IS NOT the result of too little regulation or oversight, it’s the direct result of too much govt trying to control the marketplace.

We got to where we are because people/govt thought they could defy economic laws and human nature and do “good” by intervening in the economy for a “noble goal”. But… as always, there is reality to intrude…

The govt and the liberal media is working so hard to make this look like it was the greedy businessman again who is screwing us….

The real story is a bit different. The liberals (both parties…) decided it would be “good” to get the poor and minorities into homes. The problem of course, is that the individuals they wanted to “help” didn’t have the income or credit history to quality for loans.

So they waved their govt magic wands and issued the “Community Reinvestment Act” which in reality forced the lenders to lower their lending standards to issue the loans to people that were not qualified under the original system.

Success… the poor were buying homes, well beyond their ability to pay for. The sudden increase in demand increased prices. People started using their homes as ATM’s taking out the ever increasing equity. Speculators jumped in, flipping homes, further increasing demand and prices. The lowering of standards didn’t only apply to the poor and minorities, everyone from all income groups started taking out stupid loans beyond their ability to repay and the Fed’s easy money policy kept the party going.

And then reality set in and the poor with no money down loans and no equity started missing payments and the foreclosures started. More and more, and suddenly demand dropped as more and more distressed properties hit the market. Prices plummeted. More and more people were under water in their loans and walked away, more empty houses and prices continued to fall.

The bubble created by the Community Reinvestment Act burst and the Ponzi Pyramid scheme collapsed. Suddenly the lenders were stuck with defaulted loans on properties no longer worth the price of the loan.

The blame for this debacle falls squarely on the Federal Government and the Community Reinvestment Act. Will they admit it? Nope. Instead they blame “businessmen” and demand more and more power to screw up the economy.

For those of us us that did manage our finances responsibly, and have invested in our retirement, we’re the ones that will pay this price with falling property values and falling retirement investments, and the irresponsible? We’ll bail them out. The final result is more income redistribution. The socialist do-gooders you elected will sit back and the end of the day and pat themselves on the back, their income redistribution goals were realized.

hit_ny · « **Reply #29 on:** October 11, 2008, 01:37:46 pm »

Quote from: matchbox

the poor were buying homes, well beyond their ability to pay for.

Any middle class included there as well ?

..that to me is the more dangerous bit, ppl with good credit going in for more than they can afford, cos well if the poor can, then surely anyone else can too

Matchbox · « **Reply #30 on:** October 11, 2008, 02:20:18 pm »

Quote from: hit_ny on October 11, 2008, 01:37:46 pm

Any middle class included there as well ?

..that to me is the more dangerous bit, ppl with good credit going in for more than they can afford, cos well if 'they' can surely anyone else can too

Yes it was all income groups. Once the standards were lowered by the govt, people from all income groups started overbuying.

hit_ny · « **Reply #31 on:** October 11, 2008, 03:08:44 pm »

So, normally the system should have been able to handle bad debt...

Quote

But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

Source

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