Bailout: How Would You Vote?

[2046]

1. Where do you think the current problem came from?

A. Wall Street greed and under-regulation?
B. Congressional failure to act regarding Fannie and Freddie in the 2004-2006 period?
C. 1990's social engineering policies and their natural end result?
D. Other?


2. Based on what you know (or don't know) of the bailout plan, which way would your thumb point?

[Who is like God arbour]

• I'm sorry, but I couldn't understand your question offhand.
  
  First, I had to clarify what a Bailout is:
  
  • • Bailout in economics and finance is a term used to describe a situation where a bankrupt or nearly bankrupt entity, such as a corporation or a bank, is given a fresh injection of liquidity, in order to meet its short term obligations. Often bailouts are by governments, or by consortia of investors who demand control over the entity as the price for injecting funds.
  Now I could guess, that your question tends to the current financial crisis in the USA. It seems to me, that you want to know,
  • • • 1. what are the causes for it and
        2. if I would have agreed with Bushs plan, to allocate 700'000'000'000 US Dollar to resolve - or at least to damp - the impact of the US financial crisis.
  
  
  1. • I think, the current financial crisis has mulitple causes: It's not only one cause. Some causes are ideological origin. One could start with the whole concepts of capitalism and market economy. But I think, that this would go too far.
  2. • Who believes in capitalism and market economy should agree with the following statement:
       • The bailing out of a corporation by government is controversial because bankruptcy can be seen as being caused by the failure to satisfy consumer demand; the bailing out is thus an instance of government intervention on the market overruling the will of consumers. "All this talk: the state should do this or that, ultimately means: the police should force consumers to behave otherwise than they would behave spontaneously."[Mises, Socialism: An Economic and Sociological Analysis] According to the Austrian School of Economics the appearance of monopolies can often be blamed on such acts of government intervention that preserve overstretched and badly managed corporations which market forces would have broken into smaller and more specialized companies.
       Bushs plan - as far as I know it - does not contain any solutions to prevent similar events. He has for years refused to regulate the financial sector to prevent exactly such crises althoug he was urged to do something. Insofar, it is not a treatment of the causes, but the treatment of the effects. It does nothing to prevent the happening of such a criris again.
       • This can either mean that it might encourage recklessness since the government, if such a crisis would happen again, would pick up the pieces in the event a involved bank was about to go out of business, or on the other hand it could mean those banks would have less incentive to practice thrift and sound business practices, since they would expect to be bailed out in the event of failure.
       Hence, I would have not agreed with Bushs plan to llocate 7'000'000'000 US Dollar taxpayers' money until serious methods to prevent such crises in the future are incorporated in the plan.

[Cocytus]

C.R.A.

The first meaning of that acronym is Community Reinvestment Act, a bill originally passed in 1977 and amended over the years which requires a certain percentage of bank loans (specifically home loans) to be made to low-income brackets. Essentially aimed at ending income-based discrimination, it made no provisions as to HOW banks met those requirements, and with the coming of deregulation, any number of questionable loans were made. But the root problem with this is that income-based discrimination exists FOR A REASON, and that reason is that low-income people don't have the solvency to pay off the loans. So the loan is defaulted and the bank forecloses. Only the property isn't worth anything, so all the bank accrues is debt.

The other meaning is Credit Rating Agency, a very few (basically S&P, Moody's, and Fitch) organizations which perform financial research and set credit rates for banks and companies. Unfortunately, the CRAs can and have set rates they shouldn't, fooling investors into thinking a company is safe when in fact it isn't. This can be due to poor judgement (which is bad) undue influence from the company being rated (which is worse) or the CRA simpy looking the other way, thinking that some companies are simply "too big to fail."

In any event, I disagree with the whole idea of the bailout. When a financial institution fails, and gets subsequently bailed out, it sends a message to other institutions, which are just as plagued by deficient practices as the one(s) that failed, that they can continue "business as usual" and the government will provide a safety net. So we're basically just throwing money at the problem without addressing its underlying causes. The American financial system needs chemo, not morphine.

[Praeothmin]

The American financial system needs chemo, not morphine.

In fact, it needs a complete change of lifestyle, a complete overhaul.
Even Chemo is just a way to try and fight the cancer, without identifying the cause, and without preventing the habits that caused it in the first place to cause it again.
A smoker who gets cancer, beats it, but keeps smoking is just another cancer waiting to happen.
You have to stop smoking, period...

[GStone]

I want to bitch slap 12 of those republicans that acted like babies and said 'fuck you' to the average citizen. Stupid thing on Pelosi's part, yeah, but that doesn't absolve them of their responsibility. More than once, I have heard of congressmen refer to both the House and Senate as juinor high/high school in how they interact. Take the guys in the mail room of a major pharmaceutical company. If one of them says something that hurts the feelings of a few of them, does that mean they shouldn't do their job? No.

[2046]

This is not a failure of capitalism. It is a failure of government interjection into capitalism . . . which is the usual result of government interjection.

I have a partial write-up on this stuff, but it's not complete. In the meantime, however, I just found a 10-minute video that is fairly good on the topic.

http://www.youtube.com/watch?v=1RZVw3no2A4

Note, though, that McCain was not a co-sponsor of the 2005 corrective bill until mid-2006 (it was still in play at that point, but still blocked by Dems).

Here's another video morsel on Democrats covering up the problems of the big government-sponsored entities by attacking the regulator who blew the whistle to Congress. Note that this then went on to the Securities and Exchange Commission, another regulatory agency that correctly assessed the funny-money accounting practices of Fannie and Freddie.

http://www.youtube.com/watch?v=_MGT_cSi7Rs

[2046]

As for how I'd vote, I don't know. It isn't fair that people should lose their banking jobs, and it isn't fair that people should lose their homes.

But it is the fault of those we elected to power, and thus in the end it is the fault of the voter.

Now the voter is being asked to shoulder the burden of the band-aid fix. This is somehow appropriate, but I do not like the idea of the wannabe-homeowners being left out.

But I'm also just enough of a tough-love dick to realize that if we let the government bail itself out of its mess with our money, neither the government nor the people will learn or fix much of anything.

Witness the partisan horsecrap speech of Nancy Pelosi before the first House vote on the bailout, who spent several minutes trying to blame the fiasco on Bush's "failed economic policies". That San Franpsycho is disturbing, and even Bill Clinton isn't buying their line of argument.

Were I a Republican in the legislative branch, I'd wish for some way to hold my "yes" hostage until such time as the Dems admitted . . . if even tacitly . . . that they screwed things up, say, by repealing the 90's era horsecrap that got us into this mess.

[Cocytus]

Pelosi is absolutely correct on CEO compensation. The very idea that CEOs can help themselves to multimillion dollar bonus packages while their companies founder and their employees get laid off is deeply offensive and absolutely plays a role in the current crisis.

That being said, she's absolutely wrong about any kind of forebearance for defaulting homeowners. The CRA is the root of the subprime crisis, and it's a Democratic bill. Main Street is as culpable in this as Wall Street. Average Americans are apparently still sold on the idea, typical of 1920's speculation (and we all know where THAT went) that "everyone ought to be rich." Or, to amend that for our modern attitude, "everyone ought to appear rich." So they lived well outside their means, bought homes they could not afford, took out loans they could not pay back, (many even LIED about their income on loan applications) and now here we are. Irrational financial exuberance ACROSS THE BOARD earned us the current crisis. And financial responsibility must be a hallmark ACROSS THE BOARD if the economy is going to permanently recover. Americans of all walks of life lived outside their means, and they should pay the price. Don't shield Wall Street fatcats from the consequences of their irresponsibility, but don't turn right around and give a safety net to Main Street borrowers who are just as culpable.

That may sound pretty heartless to someone who's facing foreclosure, but the truth is, if you had to take out several loans to afford that house, YOU SHOULD NEVER HAVE FUCKING BOUGHT IT. It is absolutely fair that people who bought what they couldn't afford should lose it. Financial responsibility is the lesson to be learned here. Unfortunately, I'm willing to bet that the vast majority of Americans just won't hear it.

Capitalism should have no safety nets.

[2046]

But there were some predatory lending practices at times, too, as often (if not moreso) than applicants lied on their apps.

As for safety nets . . . I'm negotiable.

It's not like the old days where you could go find a dilapidated shanty for beans and get your start. Like the government-mandated minimum wage, there's a sort of minimum wage of housing these days in the name of safety. But still, it's government-mandated.

Given that we therefore have a large gap between cardboard box and the nearest stuffed-to-legal-capacity efficiency apartment on the box-to-mansion scale, the natural housing safety nets have been deleted.

Still, though, the idea of one of the cheating and non-paying applicants getting to stay in the home now is repugnant.

[Narsil]

The way in which to handle this crisis is to completely change the system from the ground up. Unrestrained capitalism is probably one of the worst conceivable systems in the long run, and it is only through balance, restraint, checks, balances, etc. that a system can function. You don't set a game without rules, as some people start to cheat, and then more people cheat, and then before you know it the people who didn't cheat are at the bottom of the property ladder with very little income.

The people who did cheat, on the other hand, have found out that their rather wealth-generating investments such as fossil fuels have started to run out a little bit, the environment's well on its way to a massive catastrophic event which may very well wipe out many people in many different countries, and there's no way out of it in either direction. At this point, the fact that we have fucked over the environment and are still looking for more oil without looking too much for alternative sources, all the while screwing over the environment at the behest of the oil barons, will end up biting us in the arse later. Unless, of course, we get off said arse and introduce regulatory measures to fix the economics issues in the long run, before it's too late to do so and we're all regressing into something like Mad Max.

That we haven't shown even the slightest inclination shows just how utterly at the mercy of the capitalist pig-fucking wanker corporations we really are. This is what unrestricted corporatist capitalism brings us to; a big, awful mess. Capitalism is a necessary evil, as it does in fact lend itself well to most people in the world living in poverty, but we should at least regulate it and introduce at least a few socialistic aspects. You know, so people aren't paying through the nose for those necessities such as medicine, housing, food, or a decent education.

Now stop the world for a minute, I'd like to disembark at the nearest alternative universe where humanity isn't made almost entirely of idiots.

[sonofccn]

The way in which to handle this crisis is to completely change the system from the ground up.

When a better system is concieved we can discuss this, but until then I'm sticking with the only functional system devised by man.

At this point, the fact that we have fucked over the environment and are still looking for more oil without looking too much for alternative sources, all the while screwing over the environment at the behest of the oil barons

We have looked at alternatives, the only viable one is nuclear which the eco nuts won't allow. Second the use of coal and oil doesn't destroy the enviroment nearly as much as you seem to be implying. Third unless you don't own a car or refine your own crude lay of the oil companies, they do a task that the mordern world could not run if they didn't.

This is what unrestricted corporatist capitalism brings us to; a big, awful mess.

You are aware the mess we have was caused by regulation like your asking for correct? This isn't a free market mess it's goverments, well mostly any way.

but we should at least regulate it and introduce at least a few socialistic aspects. You know, so people aren't paying through the nose for those necessities such as medicine, housing, food, or a decent education.

1. The more you regulate it the worse it does. Going your path were going to end up with a European system.
2.medicine:like in Great Britan were you have rationing and now have politactions debating if older folks should just be elimenated because of the strain thier putting on the system.

3.food:I wasn't aware Americans had problems getting food, I thought we have an Obese problem not starvation? Also I would like to know how a goverment could produce the food cheaper then the Free market.

4. Education: The US already does education! We dump obscene money into our failing school systems so your plan is what? Dump even more money?

Now stop the world for a minute, I'd like to disembark at the nearest alternative universe where humanity isn't made almost entirely of idiots.

I fully agree I fill the sameway when I try and understand the sorry shape the world is in.

[sonofccn]

1. Where do you think the current problem came from?

A. Wall Street greed and under-regulation?
B. Congressional failure to act regarding Fannie and Freddie in the 2004-2006 period?
C. 1990's social engineering policies and their natural end result?
D. Other?


2. Based on what you know (or don't know) of the bailout plan, which way would your thumb point?

1.I'm picking B in my uninformed opinion.

2. While I'm the last one who should be making a decision I'm leaning against the bailout in all the forms I've seen.

[Cocytus]

But there were some predatory lending practices at times, too, as often (if not moreso) than applicants lied on their apps.

As for safety nets . . . I'm negotiable.

It's not like the old days where you could go find a dilapidated shanty for beans and get your start. Like the government-mandated minimum wage, there's a sort of minimum wage of housing these days in the name of safety. But still, it's government-mandated.

Given that we therefore have a large gap between cardboard box and the nearest stuffed-to-legal-capacity efficiency apartment on the box-to-mansion scale, the natural housing safety nets have been deleted.

Still, though, the idea of one of the cheating and non-paying applicants getting to stay in the home now is repugnant.

Oh, no doubt there were predatory corporate practices. And in all honesty, if some disgruntled homeowner decided to turn Angelo Mozilo's face inside out with a crowbar, I can't say I'd feel remotely sorry.

Corporate offices are plagued by perverse incentives. You know, where employees get bonuses for the number of deals closed, so they resort to whatever tactics they need to (deceit, intimidation, what have you) to earn the praise of the higher ups? Ultimately, the highest up is the CEO who either directly sanctioned the behavior in the first place, or knew and did nothing because he was turning a profit.

You're right in that it is not as easy to get one's start in the current market. We have a glut of housing, but we need more job opportunities, and fuel prices, more than anything else, can create them. Which is exactly why fuel needs to stay as high as possible. We'll hurt, but eventually it will become cheaper for companies to bring jobs back home rather than pay to ship goods made overseas over here. In addition it is spurring development of desperately needed alternative technologies far more than anything Al Gore is doing. It's unfortunate, but nothing gets American creative juices flowing like a good, hard kick in the crotch.

[Who is like God arbour]

The way in which to handle this crisis is to completely change the system from the ground up.

When a better system is concieved we can discuss this, but until then I'm sticking with the only functional system devised by man.

It's not true, that laissez-faire capitalism is "the only functional system devised by man".

There are other economic systems beside the bedevilled communism.

Social market economy for example is opposed to both a planned economy and laissez-faire capitalism.

The social market economy seeks a middle path between socialism and capitalism (i.e. a mixed economy), combining private enterprise with state ownership of strategic industries or resources, and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, social welfare, and public services, by using state intervention.

It was the main economic model used in Western and Northern Europe during the Cold War era. It originated in West Germany, and it is known as Soziale Marktwirtschaft in German.

At first controversial, the model became increasingly popular in West Germany and Austria, since in both states economic success (Wirtschaftswunder) was identified with it. From the 1960s, the social market economy was the main economic model in mainland Western Europe, pursued by administrations of both the centre-right (usually led by Christian-democratic parties) and the centre-left (usually led by Social-democratic parties).

It's even a goal of the European Union:

• • Art. I-3 of the Treaty establishing a Constitution for Europe:
    • • The Union shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.

[Jedi Master Spock]

I am greatly reminded of the S&L crisis that rocked the US at the end of the Reagan administration. Savings and loan institutions were, as a result of deregulation early in the Reagan years (with, actually, a couple prelimiaries passing before Reagan, true, but mostly during the Reagan administration), basically banking institutions not subject to the normal regulations of the banks.

It hit the crapper after about the same delay. The numbers are bigger now, but the government ended up footing most of the bill under Bush I in a major bailout at the beginning of his term. This S&L crisis also involved a big real real estate bubble (boom/bust cycle) as well.

Of course, this is a bigger meltdown. "Regular" banks are involved this time, for one thing. I think it's pretty clear that risky strategies pay off in the short run for banking institutions, and that if they're not carefully regulated, that means serious collateral damage when the house of cards eventually comes tumbling down.

I'm not so keen on the idea of a bailout plan myself., but I think there's plenty of blame to assign all around. The banks choosing to make bad loans get a large share. They made a bad business decision in the long term for short-term interests.

Bush II and Congress get a fair share for deregulation of the industry, and not watching their own semi-governmental lenders more closely, as they were part of the problem.

I'm not inclined to put the blame on the folks taking out those loans, for the most part. It is not their responsibility to assure the banks are lending on terms that are profitable in the long run; they enter into the bargain knowing that they get a house out of it, if they can keep meeting payments, or lose the house, if they can't. There's aways some that will, and some that won't, but the banks are supposed to figure the statistics on what terms they need to offer - if they can offer terms at all - to make money in the long term.

Handing out a bad loan is like selling something for more than it costs you to make it. I suppose the unique twist is that banks could repackage and ell off the theoretical profit - actual loss- to other banks.