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should we let the financial institutions fail?
Published Sep 24, 2008Views: 705
I've been following this economic bruhaha to the best of my ability: reading various perspectives, watching political pundits and various experts on television and reading individual blogs and websites.
One interesting take I read today essentially says that we should "let the financial institutions fail."
In regards to the huge bailout sum of $700 billion, one particular blogger writes:
"it's your money anyway, and having it used to reward stupidity and recklessness is a surefire way to waste it. There is no averting this economic crisis, it's here to stay and it will be a while before it goes away. Deal with it, and move on, because all of this bailout talk is nothing but a short-term solution to a long-term problem. Just do nothing, and let the market correct itself. Trust me, you will be better off, in the long run, that way!"
What do you think GOLO? Would it be best to do nothing?
Filed under: Politics
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All the economist I respect seem to lean more toward letting the market self correct. However, this correction is going to hurt just about all of us. Interest rates will probably soar, investor money that is needed for start up companies will disappear, layoffs and business failures will rise.
Lets not forget all the foreign capital that makes up our national debt. What happens if they lose confidence in the US?
This is going to suck.
GOLO member since October 17, 2007
September 24, 2008 10:29 a.m.
Why in the world do we continue to subsidize stupidity?
Let the market work. It will do a far better job of protecting my assets and investments than Chris Dodd.
GOLO member since July 17, 2007
September 24, 2008 10:30 a.m.
GOLO member since April 2, 2008
September 24, 2008 10:30 a.m.
GOLO member since February 21, 2008
September 24, 2008 10:30 a.m.
They need to take things over and be Socialist (modern liberal democrat) or get out. I think certain regulations/guidelines/restrictions have their place but when a private entity blows it and fails they need to fall. The Government has no money of their own so who do they think they're protecting. They're taking our hard-earned money (taxes) and giving it to to poorly (or illegally) run corporations. They're only delaying the inevitable. Money doesn't disappear, it only changes hands.
The FED cannot create money, they can only print debt notes. Its all a shell game.
GOLO member since February 28, 2008
September 24, 2008 10:31 a.m.
GOLO member since July 17, 2007
September 24, 2008 10:32 a.m.
Warren Buffet is giving them 5 billion. He owns the company I work for. Anybody know his number?
September 24, 2008 10:33 a.m.
September 24, 2008 10:34 a.m.
GOLO member since August 22, 2007
September 24, 2008 10:37 a.m.
When you start getting compared with Albania then you know your stature has fallen a bit.
GOLO member since October 17, 2007
September 24, 2008 10:38 a.m.
On that I'm 50/50. You've got foreign central banks that are already massively invested / exposed in the US economy. Many of those are facing their own looming domestic crises on the horizon (Japan's rapidly aging population, for example, and Europe's caps on exposure) that will limit to what degree they either can or will be able to inject more capital into what's shaping up to be a drain.
The only real option in that regard is China, and that poses huge foreign policy and security risks, not to mention economic dependence, that I'm not sure we can afford to be opening ourselves up to.
GOLO member since June 10, 2008
September 24, 2008 10:39 a.m.
How in the world do you get a power bill for $700. Maybe you should reevaluate how much energy you waste and change it. just a thought, my power bill runs about $150 in the middle of summer running the A/C
GOLO member since September 9, 2008
September 24, 2008 10:40 a.m.
GOLO member since October 17, 2007
September 24, 2008 10:40 a.m.
GOLO member since October 17, 2007
September 24, 2008 10:41 a.m.
With gas prices and food prices and ONE income, I don't feel I should have to pay the 1700.00 left I owe them since I've arleady paid A HUGE CHUNK, I dn't know how we are going to pay for it but Im sure something will come up
GOLO member since December 11, 2007
September 24, 2008 10:42 a.m.
GOLO member since December 11, 2007
September 24, 2008 10:43 a.m.
What people are missing as well is that the government is proposing to buy these troubled mortgages at tradable value (which is next to nothing), but not to hold them indefinitely. As the economy improves, and historically it has always done so eventually, these ABSes will be sold back into the market, most likely at a profit for the government.
Those profits, in my view, should be distributed to every American taxpayer that helped to finance the purchase (by paying their taxes) in the first place.
GOLO member since June 10, 2008
September 24, 2008 10:43 a.m.
GOLO member since July 26, 2007
September 24, 2008 10:45 a.m.
The package as delivered from the White House amounts to a get out of jail free and suffer no real consequences for screwing up card. That's unacceptable.
If they're going to be bailed out, it should be in a scenario where the terms of that bailout are dictated TO them, not BY them.
GOLO member since June 10, 2008
September 24, 2008 10:50 a.m.
September 24, 2008 10:51 a.m.
GOLO member since June 10, 2008
September 24, 2008 11:08 a.m.
September 24, 2008 11:19 a.m.
Actually, they aren't really. The top 5% of taxpayers in this country foot the vast majority (better than 85%) of the cost.
GOLO member since June 10, 2008
September 24, 2008 11:20 a.m.
I couldn't agree more. At least let it come in the form of a tax credit on our upcoming return. That would at least make it administratively "simple" for the majority.
"I think foreign capital is what is going to pull us out."
Wouldn't this necessitate some form of political collateral? That's the part of international financing that bothers me the most. Proverbs makes it plain, "The rich rule over the poor, and the borrower is servant to the lender."
GOLO member since February 28, 2008
September 24, 2008 11:22 a.m.
---
Because cutting spending means making choices and losing votes. When you have a captive audience forced to fund your pet projects, you've got the best of both worlds! You can spend and spend without thinking of the consequences other than the consequences of not spending the way the lobbyists want to you to do.
September 24, 2008 11:22 a.m.
Also unfortunately, no one knows these laws better than financial institutions.
Stay tuned now for the same thing to begin happening with the utility companies whom the government also can't afford to let fail.
So much for the free enterprise system, which we supposedly have in this country, but do NOT.
God bless.
Rev. RB
GOLO member since July 2, 2007
September 24, 2008 11:25 a.m.
When the government makes purchasing decisions or passes laws that have unintended consequences (like forcing lending companies to make the high-risk loans in the first place), the members of government are shielded from accountability (we keep electing these same fools every 2-6 years). They also tend to dig their constituents into a much deeper hole. If private business regulatory laws that Congress passes are every applied to the Congress, we'd have 538 people charged with crimes.
But, we continue to have ignorant people elect ignorant people who promise them things they can't deliver.
Let the free market rule. Let individuals decide how to spend their money in the best interests of their families. No government can spend money in my interest better than I.
GOLO member since December 2, 2007
September 24, 2008 11:28 a.m.
You didn't mention if you had any insurance...if you did, at least some of that should have been covered under the rehabilitation benefit (unfortunately, most plans limit the number of visits which sucks).
The other option is to discuss your financial situation with the therapy centre's office and see if there is anything they can do to alleviate the burden. My younger son's current therapist actually charges less for private pay than they do to our insurance (that's actually rather unusual...most of the time private pay is higher than negotiated insurance billing rates).
Depending on your policy, you might have a similar loophole that we found in terms of number of visits. Even if our son had three therapies on the same day, it was only one "visit".
September 24, 2008 11:30 a.m.
That sounds great on paper, but would you, as a consumer, be willing to endure a depression in order for the market to absorb the reset that's in the cards if nothing's done?
It's easy to make statements like the ones I've seen on here when one believes that the situation will not affect them personally. That, as has been explained, isn't really an accurate portrayal of the situation.
So, simple question: would those advocating for allowing these banks to fail be willing to go through a depression in order to see their proposed solution enacted?
GOLO member since June 10, 2008
September 24, 2008 11:33 a.m.
That being said, the proposed bailout legislation is poorly written, and seems to be yet another example of a wealthy elite taking advantage of a crisis to write into law a welfare bill for the aristocracy.
If we, the taxpayers, are going to bail out Wall Street investors, then they should not escape the consequences of the risks they took in hopes of big rewards. They should lose their equity, and their high paying jobs. No bonuses, no golden parachutes, no mega salaries.
If, in time, the assets underlying these bad loans appreciate in value, the benefit of this should go to the taxpayers, not the bankers who put us in this mess.
GOLO member since January 25, 2008
September 24, 2008 11:39 a.m.
September 24, 2008 11:48 a.m.
People simply need to make decisions to live within their means. That needs to also apply to our government.
Deregulate the markets, get the tentacles of Congress out of the free market, implement the Fair Tax, and this economy will soar to levels never before seen. I know the free market works.
Even though my 401K has taken a hit, I know that if I keep my $ in it I'll grow with the economy.
GOLO member since December 2, 2007
September 24, 2008 11:48 a.m.
GOLO member since January 25, 2008
September 24, 2008 11:55 a.m.
We got out of that solely by printing the daylights out of dollars and deficit spending to the rafters. It's the primary reason the dollar was worth vastly less at the end of the Reagan admin while government debt had almost tripled.
We're not in a position to do that again, friend.
Keep in mind that during the last depression, the market engaged in exactly the same behaviors that we're seeing now, and the effects that the crash produced were brought about by the interconnected financial markets that Glass-Steagall did away with. That's now been repealed, putting the financial system back into the exact same position it was in leading up to October 1929.
GOLO member since June 10, 2008
September 24, 2008 11:59 a.m.
GOLO member since June 10, 2008
September 24, 2008 11:59 a.m.
One of my life philosophies is to "always choose the harder right rather than the easier wrong". I teach my children to always tell the truth and bear the consequences. They will always be better than the consequences if you lie.
GOLO member since February 28, 2008
September 24, 2008 12:04 p.m.
GOLO member since August 22, 2008
September 24, 2008 12:09 p.m.
God bless.
Rev. RB
GOLO member since July 2, 2007
September 24, 2008 12:12 p.m.
We've maneuvered ourselves into a corner that we no longer have the resources to back ourselves out of if the walls start closing in on us. It's really more dire than most people believe (or are prepared to accept.)
GOLO member since June 10, 2008
September 24, 2008 12:15 p.m.
Too many people running for office (and voting) think the government is the solution. It's the problem. Get it out of the way so it can't cause any more market problems (hey, let's go ahead and spend the Social Security fund! Hey small business, that Sarbanes-Oxley is great, right? Lend to high-risk homebuyers or we'll fine the beejesus out of you).
Big government caused this problem. The American People are the solution. The free market works. The market we're in is not free.
GOLO member since December 2, 2007
September 24, 2008 12:15 p.m.
Congress thinks they are acting for the worker. They legislated many out of jobs, with many more to come.
Jefferson, Franklin, Washington, Adams, Madison...they're all rolling over in their graves.
GOLO member since December 2, 2007
September 24, 2008 12:24 p.m.
I posted a rather long blog on how this did not turn out to be the case. Laffer curve economics has been disproven more than once, but they seem determined to keep trying it anyway.
You also need to factor in that we don't create much actual wealth in this country any longer. We create artificial gains on paper that do not reflect the underlying worth of the assets that are backing them up. Add to that the massive devaluation of the dollar, and you have more of something that's worth less in the long run. It's a Ponzi scheme of massive proportions.
GOLO member since June 10, 2008
September 24, 2008 12:31 p.m.
I was speaking specifically with regard to Glass-Steagall. Post 1929, regulations were put into place to limit the degree to which the various pieces of the financial system could become intertangled. That intertangling is what, similar to a row of dominoes, caused a stock market drop in 1929 to become something much much larger.
Deregulation, as I was referring to it, would be in the context of Gramm-Leach-Bliley, which undid those regulations and allowed the intertangling to begin again in the late 1990's. Begin again it did, with vigor.
We're in a state now where those pieces have tangle themselves together again, and if one falls, it can take many more with it.
GOLO member since June 10, 2008
September 24, 2008 12:34 p.m.
Dan, how do you explain that the tax revenues have increased to the highest ever after the Bush tax cuts were enacted? How do you explain that the tax revenues went down when Clinton raised taxes in the 90s?
Seems to me that wealth needs to be created in order for that to occur. It also seems to me that foreign money keeps being invested in our country. People are lining up to enter (not leave) this country because it is the best place in the world to live and prosper.
GOLO member since December 2, 2007
September 24, 2008 12:41 p.m.
I would point you to the actual numbers and advise that you sidestep the rhetoric that abounds on the issue.
I made a very long blog on this very issue here:
http://www.wral.com/golo/blogpost/3544046/
1)Revenues were higher in the 1990s than they are currently, even without adjusting for inflation and the devaluation of the dollar.
2) Factoring in the real value of the dollar (as one must do when making historical comparisons) the disparity is even more pronounced.
It's as I told you earlier. When you collect more of something that's worth less, you're in effect collecting less.
GOLO member since June 10, 2008
September 24, 2008 12:47 p.m.
I think you are confusing the creation of wealth with the creation of capital.
1) Foreign money is drying up. Europe has already issued moratoriums on further assumptions of US debt. The Japanese, as noted earlier, have a rapidly aging population and will be doing the same shortly. Speaking frankly, they've already begun. The sole real purchaser of US debt is China, and they do this solely to fund our continued ability to purchase their products.
In the larger picture, we turn around and ship those loaned dollars right back to them. We get stuff, they get their money back and we owe them interest to boot.
You might want to investigate the recent difficulties the Treasury has had in getting T bill issues subscribed
GOLO member since June 10, 2008
September 24, 2008 12:51 p.m.
GOLO member since June 10, 2008
September 24, 2008 12:53 p.m.
Eliminate wasteful government spending programs, reduce the tax rate (simplify the tax code - HR 25 is the right solution), reduce entitlements, and more money will flow into the economy, thus eliminating the need for printing of more $ to devalue the $.
Businesses will come back to the US if it's cost-effective. No one can argue that governmental regulation is forcing businesses out of the country. Dubai is booming (I've seen it first hand). You know why? NO INCOME TAXES, limited governmental regulation, free-market economy. They're running out of oil in the next decade and have transformed into a shipping/tourism-based economy.
No one can say our market is deregulated. What is a minimum wage? What is OSHA compliance?
GOLO member since December 2, 2007
September 24, 2008 1:07 p.m.
And this, in what way, motivates companies to employ US workers when they can offshore for pennies in comparison to US wage rates and typically avoid most of the benefits packages they detest so much in the bargain?
"Eliminate wasteful government spending programs, reduce the tax rate (simplify the tax code - HR 25 is the right solution), reduce entitlements, and more money will flow into the economy, thus eliminating the need for printing of more $ to devalue the $."
Not entirely accurate. Less money would flow to the government, but bringing the value of the dollar back up makes what few exports America does have cost more, and therefore we'd sell less of them. That costs jobs. It doesn't create them.
What we truly need is an end to offshoring, IMO.
GOLO member since June 10, 2008
September 24, 2008 1:16 p.m.
My question is, are you for government regulation in the marketplace or do you believe in a free market economy?
GOLO member since December 2, 2007
September 24, 2008 1:35 p.m.
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