economic mess

So without pitting parties against each other, I thought it would be appropriate to bring up the latest bailout proposal.  Besides, it seems pretty clear that neither candidate has a clue how to resolve this.  I’m not going to pretend I have a clue either and I frankly don’t know what to think here.  I have been trying to obtain input from various sources and they all seem to have a point. 

So if we left the market to its own devices, would we have a credit meltdown that would spin us into a depression?  I don’t know.  That is certainly what Bush, Paulson and company seem to think.  There are certainly a lot of arguments that say we should let them fail so that we know what we are really dealing with.  There are those that say adding this amount of money to the national debt will cause the dollar to lose value, rates and inflation will go up, and cause 10 to 20 years of economic turmoil similar to what Japan has gone through.  I know the concepts are true but what is worse?  I have no freakin idea.

I’ll say this, I am a big believer that the free market is a great system and deregulation is a good thing.  But the deregulation I am in favor of are removing standards that limit competition and apply an undue burden on businesses.  What I am in favor of are regulations that require more disclosure so that the market knows what they are buying.  I don’t have a problem with risky loans as long as everyone knows what they are buying and that lending institutions are capitalized enough to realize their potential losses. 

I do know a little bit about how all this got started since I have been in the mortgage industry awhile.  First of all, everyone is guilty.  Home buyers are guilty for speculating.  Lenders, brokers and originators committed fraud.  Wall Street packaged these up to the world and truly put lipstick on a pig.  The large institutional investors from all over the world blindly bought trash without doing any due diligence because they wanted to make easy money.  The government is guilty of being a catalyst to this by forcing lenders to create programs for low income buyers and communities which is how subprime was re-created.  They also should have jumped in long ago because the writing was on the wall years ago.  But everyone was still making money so they let it ride. 

Now it looks like everyone will pay except for those that actually created this mess. No matter how this all goes down, it cannot be good for the economic health of our country.

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3 Responses to “economic mess”

  1. urstupidnourstupid Says:

    I’m glad you jumped in on this cause I was chompin’ at the bit. I think i agree with everything you say. I’m fascinated to see what’s gonna happen–and of course concerned. I think there’s no freakin way we bail them out with a blank check and no oversight (you saw the clause, right–no legal recourse). That’s INSANE. And Paulson has possibly the biggest balls I’ve ever seen. The thing is, can’t the taxpayers recoup the losses? The houses still have value–they aren’t disappearing. Or why can’t AIG be bought by a private firm a la Merril Lynch and then just slightly propped up if needed? Bush of course wants a bailout cause he’s out the door in 4 months and won’t have to deal with it–just passing the buck to Obama 🙂

    Everybody knew this was coming, but just not this badly or so deeply. The housing bubble was gonna burst, just like everything. And there are cycles of course. But someone has to have the guts, in good times, when everyone is making a buck, to say wait a minute, is this fundametally good business practices. Giving mortgages to people without credit checks or money down–insane–just insane.

    Interesting how the Presidential race was changed so dramatically. And I won’t even make a joke about putting Palin heading an oversight committee. Neither candidate has an answer–and they shouldn’t try to fake it. It’s incredibly nuanced, and deals with unpredictable human emotions–fear, hope, etc. A very interesting time indeed.

    See the Chargers game?

  2. urstupidnourstupid Says:

    Forgot to add this…It’s very strange when a “conservative” administration proposes to socialize our financial system–and then “liberals” push back. You think this is not only a financial change, but also a political one? It’s bizarro world. And the Bills are in first place!!!

  3. urstupidnourstupid Says:

    It is bizarre. From what I understand, sometime last week, the cost of short term capital sky rocketed. It was to the point where it would be an instant financial meltdown. I believe Paulson said that if they did not step in “heaven help us all”. Pretty scary.

    I believe the liberals pushing back is political maneuvering. If Obama were President and he put this on the table, you would see a HUGE push back from Republicans. Point being that everything is political to some extent.

    So the next big question is: What if this is not enough? There are estimates saying that our bad debt is 3 or 4 more times bigger. Definitely hunker in, we may be coming in for a crash landing.

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