Posted by: thescoundrel | October 1, 2008

The Banking Bailout No-Win, Lose or Draw


I am hot and cold about any proposed government bailout of the mess in Wall Street. I am not convinced it is the right thing to do, though considering the financial mess we face as a Nation; it might be the most prudent thing to do. I have no desire to toss good money after bad and there is no guarantee this will fix the problem. Yet without the fix market confidence could plummet even further risking many peoples 401k/retirement savings that are based on Stock Market success. The bailout at best looks like a no-win, lose or draw event for the public!

This problem was originated by Democrat and Republican legislators creating feel-good legislation seeking to make home owning more accessible to those that would normally have been rejected by banks for homeowner loans. It was a well-meaning piece of legislature that has turned in to a nightmare. As usual with feel-good socialist programs created by our government, the program was abused by Democrat and Republican lawmakers seeking to use the program for personal gains. This problem has been festering for years while Democrats and Republicans have ignored the need to fix the program. The only ones that seemed to understand that the system needing fixing were two of the most polarizing presidents in our history Bill Clinton and George Bush2 and would be president John McCain. The Congress rejected any such notion of fixing the problem when it was approached. Now the lawmakers have asked the public to ignore how the problem started and are instead, championing a public bailout that offers no guaranty of success. The problem is, if we do not attempt to rescue the banking institutions that were a big part in increasing the dangers of this mess through a complicated investment/insurance securities strategy, we all could see our retirement funds, our businesses, our ability to make purchases with credit and even many jobs put at risk. The question becomes to bailout fat cat executives whom have managed to make millions of dollars on these programs, institutions that ignored the problems they helped create, Democrat and Republican politicians that want us to forget the problems they have created and ignored or ride the downward slopes until the financial situation comes to a manageable speed. I do not like either option. But I am not sure we get much of a choice in this decision. The one thing we do have a choice is one that most people will ignore –> booting out those in Congress that ignored this problem for years.

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Responses

  1. If your retirement is in the stock market, you foolishly listened to brokers who didn’t point out that your money is at real risk. You likely just listened to the “10% annul ROI” talk and zoned out. Investing is not saving. Yes, it’s a loss, and it hurts, but it’s your own fault for not paying attention.

    If you need credit to function, you’re living beyond your means. Houses will still be sold, and loans extended to do so. Downsize if you need to. Get an older, used car, and learn some maintenance tricks.

    Bottom line, if prices are sufficiently high that only credit makes them sustainable, prices have to come down. It’s that simple. Trying to prop up stupidly high prices is an exercise in futility. Doing so by giving the lenders money by taking it from taxpayers (the consumers) is Orwellian and a betrayal of civic duty and common sense.

  2. I’m glad you did this because I could never corral my thoughts into a coherent post.

    What has always bothered me about this bailout frenzy is the fact that even though we knew some financial institutions were failing, GWB suddenly sprung the “it’s the end of the world as we know it and we must act NOW” hysteria on us, and we all know how some of those “act now or doom awaits” scenarios have played out.

    As you say, the causes for this have been going on for decades, despite attempts to put the brakes on the runaway train. For the life of me, I don’t understand why McCain has allowed the Democrats and pro-Obama press to frame this as the GOP’s responsibility. The polls indicate that they have been successful in blaming the GOP for this and it may be too late for McCain to recover. Doesn’t McCain know his opponent rose from the fetid sewers of Chicago Way politics and is no post-partisan uniter?
    Sheesh!

    Unless the entire country rises up and throws ALL the bums out including Frank, Dodd, and the others who caused this mess, there is absolutely NO WAY 700 billion will solve the problem.

  3. I do feel for those who have their entire retirement in the stock market, which is MANY people. I am glad that I am not exposed to the market right now as I am sitting in commodities, but I am one of the few.

    http://jwojdylo.wordpress.com

  4. It’s hard to believe there is really a crisis here when the Senate bill, which passed by a wide majority, was loaded with pork and pet projects that have nothing to do with the crisis at hand.

    These juicy additions include aid to rural schools, forcing insurance companies to provide coverage for mental health on par physical health and more tax breaks for both business and the middle class.

    Pelosi doesn’t sound enthusiastic about this new porkasaurus, so who knows what will happen when the House get the bill.

    Is Rome burning or are they slamming on the brakes of a runaway train?

  5. I think they are doing just what they always do. First they are playing CYA with the banking crisis. Then just as they did with the Freddie and Fannie they are looking to profit and gain off legislation. So by tacking on some pork to the bailout, some members will be able to tack on a few vote counts. Politicians never fail to rationalize and see a path to load legislation down with Pork.

    I personally think the crisis is probably worse than what they are letting on because there is too much bipartisan fear and desperation in the air. Credit is tight, small businesses are worried about meeting payroll and operational expenses, Christmas is coming where companies need high traffic to show a year end profit that only easy credit assures and even more scary for the legislators – an election is coming.


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