Am I a heretic? Maybe. If believing that God is all powerful, all loving, wiser than His creation and perfectly willing and capable of saving all of His children makes me a heretic, sign me up.
Tuesday, September 30, 2008
Explaining the Bailout
Best piece I've seen so far on why the bailout is important to Main Street. Why hasn't Bush hired Ross Perot to give a PowerPoint presentation to all of America in prime time?
There are many reasons I am against this bailout. First and foremost is it is not a solution to the problem at all. It may help in the short term, but that's the problem. It's not a short term problem. No one is talking about ending the root cause of this problem. One root cause is sub prime lending. Banks are still legally held by the Community Reinvestment Act to continue issuing loans to people who can't afford it, or face getting a poor CRA rating. This bad rating prevents a bank from growing. Without that growth, the economy will continue shrinking. In the past, small banks found a way to make these risky loans and then sell them off to larger banks, who in turn sold them to the Freddie Macs and Fannie Mae's. That's one of the reasons we are in this debacle. Having us, the taxpayer purchase the bad mortgages allows the small banks to continue shooting for a higher CRA rating, because now the tax payers will buy these bad loans too. That's what this bailout proposes.
There are many things that must be done to correct the problem. No one is discussing the steps they are going to take to increase regulation of the investment banking industry as a whole, or what to do about this CRA regulation, for example.
I think it is ironic to here the "experts" at MSNBC talking about credit not being as easy to get anymore as how this affects main street. Easy credit IS the problem. Easy credit without down payments and poor adherence to credit ratings is precisely what caused all of this. They seem to be advocating that we should maintain this terrible system. And that's what this bailout does. It enables bad economic practices. The bailout is putting off the eventuality of an economic downturn but this downturn is coming, have no doubt about that. It will not be the great depression. But things are going to get tight. Putting a finger in the dike without actually fixing the dike is a disaster waiting to happen. President Bush has been sticking his finger in the dike for the past 4 years now, now he is moving on to a larger finger.
Will Congress have the fortitude to repeal some of the regulations that led to this mess? I honestly do not think so. Not the congress we have now, with their finger pointing and blame game tactics. Until I see that Congress and the President are moving away from band-aid policies toward actually fixing what they broke to begin with, I am not going along with this plan. It's more of the same, and I personally am tired of it.
This MSNBC piece is actually an insult to the American people. They are essentially saying we don't know better. Let the lawmakers (who are not financially very well educated being lawyers for the most part) tell us what is best when it was their practices that led to this? No thanks. I have decided instead to turn to the people that have been warning of this for years, and seek out what solutions they might offer. Why are we relying on the people who didn't see this coming?
As always, I am grateful for your insight. But, I don't think anybody is saying this "bailout" or buyback is a fix to the problem. It is a band-aid. But, do you expect this Congress to pass any sweeping reform on anything? This may be the best we can hope for in the short term.
I don't disagree with much of what you have said. Easy credit is a major part of this problem. I think that problem may solve itself- at least partially. Credit is already tightening up. As I understand it, the CRA needs to be looked to and I'm 99% sure it will regardless of the fate of the bailout.
I do disagree when you say no one is discussing more regulation. I think just about everyone is. It's just not going to happen this week.
Brian- Thanks for trying to make a very, very difficult issue at least a little more understandable. I work in the housing industry and have personally seen what is happening in that area all across the US. There is no easy, short term fix. It took us a long time to get into this, and I envision it taking a long time to get out.
Hey, it's not like I really understand it. But, I'm trying. Even the experts disagree on what the solution is. But, I've come to the conclusion that some thing or a combination of things needs to be done. Someday pointed out that the bill that was defeated was certainly not the "cure" for the problem. There's much more that needs to be done.
I just don't know that America really wants to see the credit markets freeze up, as some are predicting if we do nothing. People on Main Street have to understand this is not just the problem of the Fat Cats on Wall Street.
4 comments:
Brian,
There are many reasons I am against this bailout. First and foremost is it is not a solution to the problem at all. It may help in the short term, but that's the problem. It's not a short term problem. No one is talking about ending the root cause of this problem. One root cause is sub prime lending. Banks are still legally held by the Community Reinvestment Act to continue issuing loans to people who can't afford it, or face getting a poor CRA rating. This bad rating prevents a bank from growing. Without that growth, the economy will continue shrinking. In the past, small banks found a way to make these risky loans and then sell them off to larger banks, who in turn sold them to the Freddie Macs and Fannie Mae's. That's one of the reasons we are in this debacle.
Having us, the taxpayer purchase the bad mortgages allows the small banks to continue shooting for a higher CRA rating, because now the tax payers will buy these bad loans too. That's what this bailout proposes.
There are many things that must be done to correct the problem. No one is discussing the steps they are going to take to increase regulation of the investment banking industry as a whole, or what to do about this CRA regulation, for example.
I think it is ironic to here the "experts" at MSNBC talking about credit not being as easy to get anymore as how this affects main street. Easy credit IS the problem. Easy credit without down payments and poor adherence to credit ratings is precisely what caused all of this. They seem to be advocating that we should maintain this terrible system. And that's what this bailout does. It enables bad economic practices. The bailout is putting off the eventuality of an economic downturn but this downturn is coming, have no doubt about that. It will not be the great depression. But things are going to get tight. Putting a finger in the dike without actually fixing the dike is a disaster waiting to happen. President Bush has been sticking his finger in the dike for the past 4 years now, now he is moving on to a larger finger.
Will Congress have the fortitude to repeal some of the regulations that led to this mess? I honestly do not think so. Not the congress we have now, with their finger pointing and blame game tactics. Until I see that Congress and the President are moving away from band-aid policies toward actually fixing what they broke to begin with, I am not going along with this plan. It's more of the same, and I personally am tired of it.
This MSNBC piece is actually an insult to the American people. They are essentially saying we don't know better. Let the lawmakers (who are not financially very well educated being lawyers for the most part) tell us what is best when it was their practices that led to this? No thanks. I have decided instead to turn to the people that have been warning of this for years, and seek out what solutions they might offer. Why are we relying on the people who didn't see this coming?
Blessings
Someday,
As always, I am grateful for your insight. But, I don't think anybody is saying this "bailout" or buyback is a fix to the problem. It is a band-aid. But, do you expect this Congress to pass any sweeping reform on anything? This may be the best we can hope for in the short term.
I don't disagree with much of what you have said. Easy credit is a major part of this problem. I think that problem may solve itself- at least partially. Credit is already tightening up. As I understand it, the CRA needs to be looked to and I'm 99% sure it will regardless of the fate of the bailout.
I do disagree when you say no one is discussing more regulation. I think just about everyone is. It's just not going to happen this week.
Brian- Thanks for trying to make a very, very difficult issue at least a little more understandable. I work in the housing industry and have personally seen what is happening in that area all across the US. There is no easy, short term fix. It took us a long time to get into this, and I envision it taking a long time to get out.
Don,
Hey, it's not like I really understand it. But, I'm trying. Even the experts disagree on what the solution is. But, I've come to the conclusion that some thing or a combination of things needs to be done. Someday pointed out that the bill that was defeated was certainly not the "cure" for the problem. There's much more that needs to be done.
I just don't know that America really wants to see the credit markets freeze up, as some are predicting if we do nothing. People on Main Street have to understand this is not just the problem of the Fat Cats on Wall Street.
Peace,
Brian
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