The bailout may help some of these firms, but the alternative is far more unpalatable. Without the bailout, a tightening of credit will kill all these nice little loans you need to buy cars and houses and hospital bills and that nice big tv you've had your eye on. Sure, we can be angry at the Wall Street entities that put us here, or at the McCain and his cronies in 2000 that passed the financial services deregulation bill that put us in this mess, but being angry at how we got here won't fix the problem.
The problem this bailout attempts to fix is the derestriction of the purse strings of financial institutions strapped for cash. When liquid assets are particularly low (as they are now), nobody wants to lend. If you don't lend, the economy constricts, and slows down. When it does so at the rate it is now, people start losing jobs and when you lose jobs you lose everything else. When enough people lose jobs, there's a net drain on the economy and you're hoping enough people are left in the economy to allow those without jobs to get government checks until they get a new job. It's not pretty. The bailout is a necessity, plain and simple. It's a bitter pill but not having the pill will result in exponentially worse consequences. It's not like the results will be seen in a week or two weeks. We're seeing the results now, already. They've been going on for a year and a half, and will continue. Homes are being lost at a rate alarming enough that major institutions are failing.
If you want to blame someone, blame McCain and the Republican-dominated Congress of 2000 that passed the deregulation bill. It was because of the deregulation that firms started buying up sub-prime mortgages. These large Wall Street firms had been around for over a hundred years before they collapsed. They survived the Great Depression, and all the economic slowdowns between the mid-1800's and now because they were conservative financial institutions that backed safe, secure mortgages and loans. When the 2000 bill was passed by the Republicans and McCain, the loosening of the restrictions saw some concerns get rich very fast with sub-prime loans. Some of the larger concerns (like Lehman brothers and Wachovia, etc.), saw the wealth and got greedy and entered into the risky sub-prime loan business too, hoping to get a piece of this pie. It turned out to be a poor idea. It was predicated on the assumption that housing values would continue to rise over time and that any downturns would be mitigated by the great profits outside the downturns. This rationale assumed that there would not a long period of housing starts decline. It turned out to be a bad business decision. Now, we're going to have to pay for their greed and we have no choice because the alternative is far more unpalatable.
Let's look at some of the casualties of this war: Most recently? Wachovia was sold to CitiGroup. Before that, Fannie Mae and Freddie Mac were nationalized, as was Lehman Brothers and AIG. Washington Mutial was seized, Merrill Lynch was sold off to Bank of America for a song, and Goldman Sachs and Morgan Stanley converted into commercial banks to avoid bankruptcy. In Europe Netherlands' Fortis was given $16.3 billion to stay running, the British mortgage lender Bradford & Bringley was nationalized, and Iceland's government seized Glitner bank.
There is no doubt that many, many people got loans that they shouldn't have. I can't argue that. I'm pissed at the deregulation more than anything because businesses will do what's in their best interest and when a bill comes up and says "hey, do whatever you want and there's won't be any government looking over your shoulder", a business is going to do what it does best: Looks after its own affairs and maximize profits. The consumer? The consumer will do the same. The consumer will try to get the best deal they can, even if it's ultimately not in their best interest. So, now we see two sides of this equation that will do the most they can with what they have? Who is to blame? That's an easy one: Government is around as a moderator because businesses will what they have the freedom and the temptation to do and consumers will do what they have the freedom and temptation to do. The banks didn't have to okay the loans? It is the creators of the deregulation bill who are at fault here, plain and simple. Businesses and consumers will do only what they are created to do... generate profits on one hand and consume to keep the economy going on the other hand.
If the moderator puts the two in the sand box and tells them to do at it without looking at how they're playing, and not giving them rules/guidelines on how to do it, at some point the lack moderating force will create chaos. Sand will be kicked up by mistake and get in someone's eye. Whatever. The point is, government has to be thought of as an elected parent, that allows us freedoms, but also stands in as the arbiter of disputes, giving us the broundaries and rules we need so that both sides get along.
It is a noble concept (and I stress "concept"), that small government is good. This is the Republican platform and as a theory it is fine. The reality is that a balance has to be struck between competing interests and the less control you have over the process, the more harm that can result. Recall please, if you would, Ronald Reagan deregulating the Savings and Loan industry in the 80's. Does anyone remember what happened? Business took advantage of the deregulations and ballooned. When the chicken came back to roost, the same fiasco resulted and they were bailed out. The only difference between this fiasco and that is that instead of mortgage-backed loans at the root of the problem, they were peoples retirement savings at stake. Millions of American's life savings (and retirement savings), were consumed by greedy S&L entities taking advantage of the lack of government oversight as a result of a Republican Congress intent on derestricing business and removing government oversight in the name of Small Government.
So, here we are, twenty-some years later and more conservatives were able to sneak another deregulation bill through in the name of small government and what's the result? Yes, a big mess. Instead, this time it's not people's retirement savings, it's their homes. To me, this is almost evil. It reminds me of a few years ago when Bush was going out and saying "It's your money. You should be able to do what you want with it." when talking about IRA's and trying to legislate the ability of consumers to invest that money in the stock market instead... which is fine if you have a great financial analyst and can trend the market well, but it really benefits the fat cows contributing to the Republican Party more than anyone else. They're the ones with the insider information before other people do and can leverage their investments so that the risk is taken out of it. Remember: Stock Markets gain by one person is at the expense of another. So, for you to win big in the stock market, someone else has to lose big, and this is what Bush and his friends counted on. They wished to loosen the strings on the retirement industry again by allowing people to invest as they wished. It was a back-door deregulation and the losers? Who would they be able to complain to? Them losing their retirement on poor investment decisions would be their own fault. Meanwhile, some fat man smoking a cigar would be laughing himself into another yacht.
Sorry, but this whole deregulation topic stinks and I fail to understand why more people don't look at the past and see how it continues to repeat itself.
The problem this bailout attempts to fix is the derestriction of the purse strings of financial institutions strapped for cash. When liquid assets are particularly low (as they are now), nobody wants to lend. If you don't lend, the economy constricts, and slows down. When it does so at the rate it is now, people start losing jobs and when you lose jobs you lose everything else. When enough people lose jobs, there's a net drain on the economy and you're hoping enough people are left in the economy to allow those without jobs to get government checks until they get a new job. It's not pretty. The bailout is a necessity, plain and simple. It's a bitter pill but not having the pill will result in exponentially worse consequences. It's not like the results will be seen in a week or two weeks. We're seeing the results now, already. They've been going on for a year and a half, and will continue. Homes are being lost at a rate alarming enough that major institutions are failing.
If you want to blame someone, blame McCain and the Republican-dominated Congress of 2000 that passed the deregulation bill. It was because of the deregulation that firms started buying up sub-prime mortgages. These large Wall Street firms had been around for over a hundred years before they collapsed. They survived the Great Depression, and all the economic slowdowns between the mid-1800's and now because they were conservative financial institutions that backed safe, secure mortgages and loans. When the 2000 bill was passed by the Republicans and McCain, the loosening of the restrictions saw some concerns get rich very fast with sub-prime loans. Some of the larger concerns (like Lehman brothers and Wachovia, etc.), saw the wealth and got greedy and entered into the risky sub-prime loan business too, hoping to get a piece of this pie. It turned out to be a poor idea. It was predicated on the assumption that housing values would continue to rise over time and that any downturns would be mitigated by the great profits outside the downturns. This rationale assumed that there would not a long period of housing starts decline. It turned out to be a bad business decision. Now, we're going to have to pay for their greed and we have no choice because the alternative is far more unpalatable.
Let's look at some of the casualties of this war: Most recently? Wachovia was sold to CitiGroup. Before that, Fannie Mae and Freddie Mac were nationalized, as was Lehman Brothers and AIG. Washington Mutial was seized, Merrill Lynch was sold off to Bank of America for a song, and Goldman Sachs and Morgan Stanley converted into commercial banks to avoid bankruptcy. In Europe Netherlands' Fortis was given $16.3 billion to stay running, the British mortgage lender Bradford & Bringley was nationalized, and Iceland's government seized Glitner bank.
There is no doubt that many, many people got loans that they shouldn't have. I can't argue that. I'm pissed at the deregulation more than anything because businesses will do what's in their best interest and when a bill comes up and says "hey, do whatever you want and there's won't be any government looking over your shoulder", a business is going to do what it does best: Looks after its own affairs and maximize profits. The consumer? The consumer will do the same. The consumer will try to get the best deal they can, even if it's ultimately not in their best interest. So, now we see two sides of this equation that will do the most they can with what they have? Who is to blame? That's an easy one: Government is around as a moderator because businesses will what they have the freedom and the temptation to do and consumers will do what they have the freedom and temptation to do. The banks didn't have to okay the loans? It is the creators of the deregulation bill who are at fault here, plain and simple. Businesses and consumers will do only what they are created to do... generate profits on one hand and consume to keep the economy going on the other hand.
If the moderator puts the two in the sand box and tells them to do at it without looking at how they're playing, and not giving them rules/guidelines on how to do it, at some point the lack moderating force will create chaos. Sand will be kicked up by mistake and get in someone's eye. Whatever. The point is, government has to be thought of as an elected parent, that allows us freedoms, but also stands in as the arbiter of disputes, giving us the broundaries and rules we need so that both sides get along.
It is a noble concept (and I stress "concept"), that small government is good. This is the Republican platform and as a theory it is fine. The reality is that a balance has to be struck between competing interests and the less control you have over the process, the more harm that can result. Recall please, if you would, Ronald Reagan deregulating the Savings and Loan industry in the 80's. Does anyone remember what happened? Business took advantage of the deregulations and ballooned. When the chicken came back to roost, the same fiasco resulted and they were bailed out. The only difference between this fiasco and that is that instead of mortgage-backed loans at the root of the problem, they were peoples retirement savings at stake. Millions of American's life savings (and retirement savings), were consumed by greedy S&L entities taking advantage of the lack of government oversight as a result of a Republican Congress intent on derestricing business and removing government oversight in the name of Small Government.
So, here we are, twenty-some years later and more conservatives were able to sneak another deregulation bill through in the name of small government and what's the result? Yes, a big mess. Instead, this time it's not people's retirement savings, it's their homes. To me, this is almost evil. It reminds me of a few years ago when Bush was going out and saying "It's your money. You should be able to do what you want with it." when talking about IRA's and trying to legislate the ability of consumers to invest that money in the stock market instead... which is fine if you have a great financial analyst and can trend the market well, but it really benefits the fat cows contributing to the Republican Party more than anyone else. They're the ones with the insider information before other people do and can leverage their investments so that the risk is taken out of it. Remember: Stock Markets gain by one person is at the expense of another. So, for you to win big in the stock market, someone else has to lose big, and this is what Bush and his friends counted on. They wished to loosen the strings on the retirement industry again by allowing people to invest as they wished. It was a back-door deregulation and the losers? Who would they be able to complain to? Them losing their retirement on poor investment decisions would be their own fault. Meanwhile, some fat man smoking a cigar would be laughing himself into another yacht.
Sorry, but this whole deregulation topic stinks and I fail to understand why more people don't look at the past and see how it continues to repeat itself.
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