Tuesday
Sep302008
Bankruptcy, not bailout, is the right answer.
I could not have said it better myself, so I'm not going to try. Here's a fantastic article concerning the government bailout fiasco that I agree with 110%. Economist Jeffrey Miron says the bailout plan presented to Congress was the wrong solution to the crisis; click here to read why.
Many thanks to Atlanta Pete for the image.
Sep 30, 2008
Reader Comments (38)
You could definitely apply a bad parenting metaphor to the bailout plan: If you go around paying for your child's damages without any consequence to the child, you're sending a wrong message to the child.
Aaaamen.
All I know is tomorrow I'm getting 15k delivered from my annuity, and mailing in another form to close it out. I HAD left 10k in it but I'm already out $1800 I can't replace through no fault of my own- and that greatly angers me. I'm not a fan in any way of having money somewhere you can lose it. If I have money, I expect to spend it to the last dime, or have some interest gaining on it. Never, never have it disappear on me. I would have been able to live on that $1800 for 4-6 months easily, since my expenses are minimal currently.
I'll take what's left and put it in my FDIC guaranteed bank. I've already had my credit ruined from not being paid money owed me in the past- I'm done letting society screw up my life and take my money with no recourse.
I think this pic says it best:
http://www.blogsmithmedia.com/www.autoblog.com/media/2008/09/83011437_450op.jpg
Amen to this Kevin...Amen!
Its Big government neo con white house and big government democrats vs. a group of true conservatives.
They have a much better plan that puts the bill on wall street where it belongs. This is not a freakin great depression. People need to stop proclaiming the end of the world.
what's under the blur? lol
Spot on, Kevin! Thank god for the house republicans standing up for something for once. We don't need more government.
The Federal Reserve has pumped in 620 Billion already, yet no one is mentioning it on the news hmm. Maybe the Bailout Plan is just political? Sorry Fox News but I think my credit cards will still work after this is over.
I guess we can look on the bright side. Recessions weed out the bad companies and the strong ones make it, thus the economy strengthens. Or so my prof. says.
Good thing McCain put his campaigning on hold to fix this mess. Imagine how much worse the Dow would have dropped if he went on Letterman!
Unrelated, I once dated the poster child for the scenario Cruz described above.
>_<
Dows up 460. Ahhhh!
why would we expect them to do something thats fair or right
man f**k economist jeffery miron. he ruined my mad max remake with his statement about no end of the world when our contry goes under.
prick
Totally agree Kevin. In the past few years I've watched my folks go from financial stability to financial chaos. Both of them work in the real estate business which currently is non existent in the U.S..
It's very sad when you see two people work their entire lives and be forced to re-evaluate their careers at age 60. Sure, they did not plan well for their futures, but nobody thought something like this would happen.
My girlfriend and myself both work as teachers, and even this age old and "noble" profession has not escaped this crisis. All but the most "senior" of teachers are finding themselves looking for work.
Thanks for the good post, and thanks for making us laugh.
Ash "legsarebroken" S.
yay
Bah at these subprime mortgages, whatever happened to rent-to-own homes?
Yeah, the whole idea of a mortgage is pretty silly in my opinion. Rent-to-own is a much more appropriate option for most people anyway. Hopefully real-estate brokers will catch on.
Some people here must not have a 401K. I'm screwed.
Sorry Kevin, but Mr. Miron is a libertarian economist who comes from the school of thought that you should let the market take care if itself no matter what (even in the case of monopolies), which is really what got us into this mess. Conservatives are trying to put the blame for the subprime lending mess on poor people who took loans they could not afford because they hate liberal spending programs.
However, subprime lending was far from limited to the poor. Because the housing market was on fire, the middle class and many speculators took these loans for amounts they could not afford. The banks were glad to loan the money because they believed the housing prices would continue to rise and their loans would be safe. As we know now, the housing market tanked, and now banks cannot get their money back from the sale of foreclosed homes (if they are lucky enough to sell them at all). GREED caused this debacle more than anything...and the lack of oversight from Washington.
Unfortunately, the American taxpayer is going to have to pay for this garbage. Failure to do anything will have financial repercussions for everyone (although the Great Depression argument reminds me of Chicken Little). If too many corporations are forced in to bankrupty, there will be major consequences...many of the employees of those collapsed companies will lose their jobs. The average worker with a 401K will take permanent losses and those close to retirement age may have to continue to work for the rest of their lives.
Because of this, the bailout in some form will likely pass. While the House Republican plan sounds better on paper, it will create a huge bureaucracy that will take too long to set up and likely will not function as intended (i.e. Homeland Security).
I always kind of laugh when people say "no one saw this coming." Didn't we just have the tech bubble a few years ago? Remember all that crap about the NASDAQ being the "new economy?" At its high in 2000, that index was over 5000 points. Today, it closed at 2,082.33. Lesson: stay away from bubbles and don't get caught up in the excitement of a new economic trend.
This isn't just something to "bail out" the big banks, mortgage companies, etc. This also deals with retirees too. If you stop and think about how many people are effected by this crisis then maybe you'll get why we need some help. I don't know if a bail out with the companies paying back the government on interest is the right call, but the way it is right now is a very slippery slope.
When you start your calls for no bail outs, think about your parents or grand parents and then decide what you want.
What happens to the 67 year old that just retired that should get 20-30k a year and now may only get 10-15k on top of there bills for hospital, prescription, etc.
raven,
I agree with you 100%.
Perfectly stated.
I just want to get your opinion on the current plan that should go in front of the Senate tomorrow and what has been added to it?
"$78 billion in renewable energy incentives and extensions of expiring tax breaks" and "Mental Health Parity provision, which would require health insurance companies to cover mental illness at parity with physical illness".
I'm not going to say if those are right or wrong, but they do not need to be added on when it comes to vote. Also the FDIC insurance increase is just feel good legislation. Most people with $100,000 in the bank know how to structure their accounts to not have to worry about it.
One last thing......... I'm not Jewish, but I would like a couple days off too????? Hey, if it works for the house and the vote in the Senate is being pushed off..........................why not me???????? Then I would expect every other religion's important dates will be observed as well.
End of rant.........
Glad to see that Kevin is a supporter of Hayek style economics as opposed to Keynesian. Basically allowing the economy to work its self out as opposed to government assistance insures that those who engaged in unwise market strategies suffer the loses. Economic recession is inevitable in any market, it is to which extent and how fast an economy can recover that should be focused on. Deregulation, minimal government involvement and truly free markets are the key. Big fan Kevin, keep doing what you do.
Gary B
Columbia University, Econ Major
Don't listen to Miron, from what I can tell, most economists don't understand the risk involved here, and he misrepresents who the bad actors were in the current crisis and fannie and freddie's history. The problem isn't economic in nature, it is a technical function of the banking and finance system. There is a widespread risk of many regional banks failing, or just as bad, to stop lending. This could lead to chaos in which millions (more) are left unemployed. There is no guarantee that Paulsen's proposal will work, and even if it does, the taxpayer won't recoup the complete $700 billion. But the risk of doing nothing is greater. Like Admiral Adama said, sometimes you just have to roll the hard eight.