To paraphrase Jon Stewart: unless you have been living in a cave, you are aware that the financial markets are in turmoil. If you have been living in a cave, congratulations! You have made a sound real estate investment.
As good of an analysis as any that I have seen on what happened can be found here on the Freakonomics blog. A large part of the cause of this mess was the implicit government guarantee of mortgage securities sold by Fannie and Freddie. Essentially, this privatized the profits but socialized the losses in these mortgage investments, which has had far reaching consequences.
I am very much opposed to any sort of bailout for any of the firms that have screwed themselves by relying on the government guarantee of an inflated market. The reason that capitalism works is because the folks getting the profits are also incurring the risk of loss. To use the force of government to undermine this fundamental principle is, in my mind, fiscally immoral. What signal does that send to firms who were driven out of the market because the risks were too great, to see their competitors who ran them of business get a taxpayer handout? There is capital out there in the private market: Bank of America, Berkshire Hathaway and JP Morgan Chase have all recently purchased large, troubled companies.
I also despise how politicians, most notably John McCain who has really taken an interest in this mess, pretend that they can “do something” so solve this crisis. The only thing he will do is exactly what he did do: run around like a chicken with its head chopped off. Politicians of either party can only draw this mess out and make it worse.
One final rant: I have noticed an increase in attacks on the “free market” system by everyone and their brother. Locally, the hotbed of this seems to be the letters to the editor section of the
10 comments:
Everyone who votes for a candidate that supported this is a party to their own financial demise.
Third party candidates are available in most elections and are as outraged as average janes and joes over this. When no third party candidate is running, there is NOTHING stopping voters from writing in a name. If you'd rather have Mickey Mouse in office than the two most prominent options, then say so.
Mickey Mouse is overqualified. He can see Cuba from his house in Disney World.
Although McCain's response to this has been less than stellar in my opinion, he at least has given an indication of whether he supports the legislation or not. Obama has only said "700 billion is a big number". Since Bush took office, the republicans have made numerous attmepts (I believe 17 by one article I read) to adopt new legislation to stop the crooked accounting practices of the banks and the wall street companies, and to reign in shady mortgage lending practices (like the guaranteed minority loans that the democrats encouraged F-Mac and F-Mae to partake in) only to be blocked and stymied by the democrats. SO I don't see how this can be blamed on the republicans which is what Obama and Pelosi and Schumer and Franks are doing.
The House and Senate Republicans should not support this bailout proposal, which is not even guaranteed to stop the problem. This basically amounts to a money grab and I am totally against it. As you correctly pointed out, several large investors/companies have already swooped in and bought up floundering institutions so I have every reason to believe that that would happen again, and therefore there is not a huge likelihood of having a total economic collapse.
The demise of the Glass-Stegal was presided over by President Clinton.
However, it's Bush's administration who is going for the 700 Billion in taxpayer money.
They are BOTH astoundingly wrong.
PZ- interestingly, I read somewhere that one senator said his mail was 50% “no” for the bailout, and 50% “hell no”.
FM - funny. I think I'd classify myself in the "hell no" group.
ANON - I agree. Bush is pushing a very bad proposal. He has not done hardly anything worthwhile in the last 3 years - and this is the icing on top. If he were running again I would not even think about voting for him.
This bailout plan sounds like just another money and power grab. Both parties are to blame for this mess, and I seriously can't see how to trust any of them with a solution. But, if this bailout plan isn't the solution, what is? I've been searching and I'm having a hard time finding people offer alternatives to the now-failed legislation with explanations of how/why they will work. Can anyone share some links?
In my opinion, the best solution is to let the market handle itself. The invisible hand always finds equilibrium in the market.
Politicians try to convince us two things: 1. that they can do something and 2. that they should do something. Neither is true.
Beefing up the FDIC is a good option.
We'll have the same economic impact after the bailout but add to that the certainty of higher taxes.
The best idea in my mind is instead of giving money to wall street institutions and mortgage banks that were corrupt, give the money to the Small Business Administration and let them approve applications for credit or loans as they see fit - with higher consideration being given to small businesses and to businesses that have legitimate accounting practices in place (ie: trustworthy companies). Let the corrupt companies go belly up.
Post a Comment