Well isn’t that just dandy. Stocks are back up, Wall St. traders are all smiles and we can get back to the business of poor business practices because… it apparently just doesn’t matter anymore.
The Bush administration proposed a $700-billion taxpayer-funded plan on Saturday to buy up toxic mortgage-related securities in an urgent effort to calm financial markets and attack the nation's housing crisis.
Under the program, the U.S. Treasury Department would buy, or commit to buy, "mortgage-related assets from any financial institution having its headquarters in the United States," said a copy of the Treasury Department's draft legislation obtained by Reuters.
And oh, by the way. What makes this “intervention” even better is the fact we’re writing one big fat bad check after another that we won’t ever have to worry about. We’ll leave that for our children and grandchildren to sort out when we’re all dead and gone.
For his part, McCain has been critical of these buy-outs saying the Federal Reserve should in the future must stop bailing out failed financial institutions and get back to its “core business of responsibly managing our money supply and inflation.” Fat chance of that ever happening again.
And Suit…? He looks to be assuming the mantle of Bush III quite well, approving of this unprecedented bail-out plan. And while he’s mentioning it, how about another check in the mail from the government to get the economy moving? And of course, as B-Daddy detailed here, how about some more “tough government oversight?”.
What a joke this guy is. He is part of the very socio-political caste of people that raised hell with the mortgage industry for freezing-out minorities back in the good ol’ days of the housing boom and threatened all manner of investigations, legislation, lawsuits and bad publicity.
So lenders responding to the “red-lining” threats threw open the books and with arms and legs flailing and flopping all over the damn place, the orgy was on. Hello, subprime lending practices.
And all this from a guy who has close ties to the leadership of Fannie Mae and Freddie Mac, two of the biggest abusers in this mortgage meltdown.
The “regulation” in a free market is the risk. You make a foolish business decision, you pay. You get into a bad loan, you pay. You play fast and loose with common sense lending practices, you pay. That’s the regulation. That’s what keeps things in line.
Well, now that we don’t have to worry about all that unsavory “risk” stuff anymore, we can hardly wait to see what brilliantly conceived and executed “tough government oversight” will do to spur long-term economic growth and stability.
Articles here, here and here.
Saturday, September 20, 2008
$500 Billion... make that $700 Billion and counting...
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6 comments:
Dean,
Thanks for breaking this down. The more I think about it, the more I believe that bad lending practices, aided and abetted by government, are the root cause of the current debacle.
Guys, it's more complicated than you might think. Here at Blogworld, there was a panel of folks discussing blogs and the financial crisis. I'll post on it later, but one of the key things they said was that these banks were not bailed out because they were too big to fail, they were bailed out because they were too metastasized to fail.
That is to say, if GM failed, you could isolate it from most of the rest of the economy. If these banks fail, they drag down firms two and three linkages removed from them. It was generally agreed that there was not much of a choice in this.
Also, they put the final bill somewhere between 1 and 2 trillion dollars. I'd like to see how this massive increase in debt affects the liberals' demand for monstrous healthcare programs.
KT, While I certainly agree that the fall-out from the crisis may be complex and far-reaching, the causes were not.
Household debt: $14 trillion
Financial corporate debt: $16 trillion.
Non-financial businesses debt: $11 trillion.
Combined Federal, State and local debt: $7.5 trillion.
To paraphrase the Prez: Corporate America, the American public... and Washington got drunk.
I don't see what is so evil about the term "bankruptcy".
And I don't see how the short-term pain of "non-intervention" will be worse, ultimately, than the long-term ill-effects of "intervention".
More debt and a huge cultural and practical paradigm shift where we've thrown away the "stick". I'm not buying it. Actually, I don't have a choice, now, do I?
Dean, we were talking runs on banks completely removed from the contagion if we didn't bail those boys out.
Now that we've taken on another huge debt load, what does this do to Obama's plan for nationalized health care?
KT, I've posted on my answer to your question.
Regarding Obama's health care plan: I don't believe this does a whole lot to squash any universal health care plans.
When "health care" is held as an ideological pursuit rather than a pragmatic end, then no amount of reason... or debt will convince the zealots otherwise.
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