Have we not learned anything from the S&L debacle 20 years ago in which taxpayers had to assume all the bad debt through the Resolution Trust Corp? Instead of the FDIC playing the role of enabler by guaranteeing deposits and encouraging growth in the commercial and industrial development markets of the 1980’s, we had banks lending far more money against U.S. residential property than historical norms and prudence required.
This proposed solution is the most expensive bailout in the nation’s history, completely curtailing the ability of the next president to push for tax cuts or new spending. And Paulson couldn’t or wouldn’t even answer whether this bailout would cover defaulted college loans and credit card faults.
Let’s be realistic, the $700b the government wants to avoid an “imminent meltdown of the U.S. financial system” will probably be double that. The Bailout Plan says give the Secretary of Treasury $700,000,000,000 to purchase mortgage-related assets from any financial institution headquartered in the U.S. and not have any judicial or administrative review of its handling. Better yet, they don’t even plan to create an entity to handle the money, just hire a few more ‘authorities’ to manage it.
So we should hand over a blank check to the government, the same government that lied to us about reasons for war, to buy assets at “hold-to-maturity” prices instead of the “firesale” prices. Which means instead of forcing the banks to sell their loans at severely distressed prices pay the price of what the loans would be worth down the road. This allows the banks to dump assets at prices more favorable to them. And, the banks are only going to sell assets they think the government is over paying, otherwise, why would they sell them?
Which, additionally means, if the banks were really in trouble they would be willing to sell their assets at anything they could get for it. Apparently, Paulson and Bernanke want to go in pre-maturely hoping that cleaning up the bank’s balance sheet will quickly fix the housing market. Is this bailout really going to loosen credit and open up the banks to more lending? Are these new loans going to soak up all the excess housing inventory?
To me it seems more of a Wall Street bailout. They were the ones who created this mess by manufacturing a trillion dollar sub-prime industry, and then passing off that risk onto a multitude of third-party investors. As a matter of fact, I’ll go as far as saying that Wall Street is blackmailing Congress.
Everything in the U.S. is tied to the price of stock. And I don’t believe our stock market is a ‘free market’ but controlled. U.S. stock prices and the U.S. market can be manipulated in a downward direction, and the SEC doesn’t do its job in watching this because if it did, there wouldn’t be this “meltdown”. They were the ones who pushed out money to be loaned by any means necessary – qualifying loans with no money down, no proof of employment, no credit check.
We saw the little activity of trade that occurred today. Supposedly, if no decision is made by next week the stock market is likely to plummet 1000 to 2000 points and eventually will crash.
That’s just what America needs right now – FEAR. Instill fear in us and we’ll be willing to listen to anything the government conjures up. Get us in panic mode and we’ll turn over all faith to those who created the problem for us to begin with. It’s not like this was some surprise. Anybody in or related to the mortgage industry could foresee this doom.
The banks are not yet on their deathbeds. In fact, it almost seems like we are trying to convince the banks to participate in this plan and they are currently only likely to sell their poorest quality assets. I feel the ‘administration’ is trying to get something by us before we have a chance to properly mull it over.
It clearly seems that all the wreckage is getting passed off to the taxpayers. I think the bailout will force the feds to raise taxes, regardless of who becomes the next president. There won’t be any money for new programs and this assures cuts in other programs. Worse, the US debt is never going to go away.
So what is in this proposed Bailout Plan? It proposes that there be more regulatory oversight for mortgage lenders. It states responsibility for regulating insurance companies would gradually be shifted from the state to the federal level. The SEC and Commodity Futures Trading Commission should be merged. These new combined agency should engage in faster approvals of new financial products and rearrangements and clarifications of current regulatory responsibilities to be implemented.
Whatever that means - all for $700b!
Why doesn’t the government divvy up that money, spread it equally among every US citizen, let us pay a bill down and give me hope that the government is really working in the interest of the people.