Here we go.
B-daddy
Absent guarantees that government will repeal the Community Re-investment Act, dismantle Freddie and Fannie, and have a time certain limit on unbundling the bad assets, I cannot support this bail out. And the fact is, once one starts down such a path, such guarantees are almost always broken by government anyway.The Ohioan
I don't like big government, I don't like the nanny state, and I really don't like the government getting involved with private markets.My reply
Since you sort of asked us to choose, I guess in this case I think the first is worse than than the second, so with very lukewarm support, I'm in favor of a bailout.
Thanks for the comments. (I luvs comments! I must has moar!)
:-)
I stopped by my local Wells Fargo branch yesterday to talk with the investment banker there. We chatted about the WaMu takeover. He said their Wells Fargo branch had seen lots of people walking in with money pulled out of WaMu opening accounts at Wells Fargo. It was the beginning of a run on WaMu.
I think the terror of the situation is not in the economics, but in the psychology. You just can't afford to have runs on banks. Once it begins, no one will know who is solvent and who isn't. Rumors will spread and people will leave work to get their money and if nothing else, just keep it in cash.
No bank has the reserves to withstand that kind of panic. Even the healthy ones like Wells Fargo and JP Morgan would go under. That's why this bailout is necessary. The posts and comments across the blogosphere all focus on the rational response to what's happening. In truth, we probably could swallow a few toads in the form of bank failures and survive if it didn't result in a panic. However, man is not a rational animal, he is a rationalizing animal.
The bubble was created in part by mortgage brokers deciding to make money for themselves by making lousy loans, knowing they were contributing to the upcoming crash, but also knowing their contributions were so tiny that if they stopped, the only effect would be less money for them personally. In the same way, each individual would rationalize pulling their money out of their bank by deciding that their deposit was so small that it would have no effect on the bank run, but if they left it in they could suffer major losses personally.
Finally, B-daddy's fear is well founded. The dispensation of bailout checks will be managed by a Democratic congress and quite possibly an Obama administration. We got into this mess because they have yet to accept the notion that poverty has very little to do with money. Through the Community Reinvestment Act, first a Carter and then a Clinton program, they made sure that loans were available to people regardless of credit history. The redistribution of wealth will be at the heart of the bailout execution. You can see it in their press releases. Both Chris Dodd and Barack Obama think that mortgage defaults, caused by a non-existent recession, was the cause of this crash.
In spite of that, I would rather have $700B in the hands of Barney Frank and Nancy Pelosi to hand out to homeowners who couldn't balance their checkbooks if you held a gun to their heads rather than a panic and a run on the banks.
The media really seems to be twisting how Americans feel about the bailout and this bill. The media seems to keep repeating that Americans don't want this bill to pass and we don't understand what will happen if it does not pass. That Americans don't understand how the system as a whole will be affected if this bill is not passed. This is not accurate. Most of us Americans are not as ignorant as this current administration and have seen this coming for some time. We are not saying that something should not be done. We are saying that this bill is not right and should not be passed. We want an alternative!!! This bill is insane and really does not involved the average American. We need to come up with a bill that corrects the problems at hand and resolves these issues. The American people need more in return. We need to be helped out. This bill stinks and we need to come up with something better that involves helping out all Americans directly and not just the top of the chain and expect this trickle down effect to work all of the sudden. It hasn't worked what will make it work now? Why are we throwing more wood on a burning fire? Lets let the fire burn out and then build accordingly. We all agree that something needs to be done. But don't let that make us pass this insane bill that is not going to correct the problem or truly help your fellow Americans! Draft a new bill with head economists and have it open for discussion. And by not passing this bill is not what is hurting the market it is the fear that the government that has forced upon this nation that is hurting the market. They are manipulating the market right now with this fear method that they always do to get done what they want. DON'T LET THEM PASS THIS BILL! IT WILL NOT WORK AND IT IS BOGUS. Make congress come up with another option bill that helps out everyone and does not mainly focus on Wall Street and banks. We have to do something but this bill is not the solution and I think everyone knows that. That is why it failed Monday.
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