The bleeding hasn't stopped."What's wrong with letting bad businesses fail? I don't buy all the talk about too big to fail. I say you fail because you are poorly managed. You have to fail. You lose your house because you had no economic business buying it in the first place. You have to lose it. Those that played by the rules will thrive in due time.
We blew through $150 billion dollars when all the non tax paying Americans got rebates that promised to fix the economy. Didn't work. Then we blew through 1/2 of the 700 billion dollars trying to save banks. And the banks are worse off now than they were before.
Now we want to throw $850 billion dollars at a problem that money can't fix. The assets are worthless because no one can force anyone to buy a house for $500,000 when it's only worth $250,000.
I have a different proposal. Instead of throwing hard earned tax payer dollars at businesses and Americans that are proven failures at risk and money management, why don't we give $850 billion dollars to all the people and businesses that didn't mess things up. That played by the rules. They are the ones that have proven their ability to succeed.
Now. Where do I go to pick up my check?
he assets are worthless because no one can force anyone to buy a house for $500,000 when it's only worth $250,000.
ReplyDeleteNot as simple as that. The assets are collateral debt obligations (CDOs). Even if, for example, 20% of mortgages default and there is 50% recovery (as in your example), the market value of CDOs containing these mortgages may be as if 50% of mortgages were failing and with no recovery (i.e. the value of home you mentioned is $0). Mark-to-market rule requires banks to re-evaluate the value of these securities quarterly and to write down any loss in market value. This causes banks to sell these securites further driving the cost down. Since banks have specific capital requirements, they also need to put more money in reserve to compensate. This causes a) negative earnings b) less money available for lending for businesses and such. In addition, this causes freezes on interbank lending - nobody know what another bank has on its balance sheet.
Without credit there is no economy. A shipping business needs to pay for the goods, pay its workers, deliver the goods, get paid. So it needs a short term loan. Other businesses cannot match expenses exactly to the time they get paid.
I don't like the bailout any more than you do. But maybe if we are lucky it saved us from the next Great Depression...
You know those times you hate it when business people or government officials start blabbing about medicine and things they don't know anything about?
ReplyDeleteI think it's about time you take your own advice.
I read in the paper that the next "rebate" is actually going to be given to folks via their paychecks by actually lowering the amount of social security tax that they pay. If this is true, then only those that are working and paying social security taxes will be the ones to benefit - not crack addicts.
ReplyDeleteThousands and thousands did not apply for those stimulus checks the last time around.
ReplyDeleteAlso, the newest proposed stimulus "payment" is going to come in the form of a tax cut on paychecks, in one form or another, so don't think the crack addicts will be getting that unless they're still working. See the following article:
http://www.washingtontimes.com/news/2009/jan/09/tax-cut-idea-pits-payrolls-vs-social-security/
Happy, I saw just the book for you to read and to help some of your arguments. Please read the following:
ReplyDelete“New Deal or Raw Deal?” by Burton Folsom re: Farming Subsidization in the 1930’s and what it led to, and did not achieve
By studying the failed New Deal policies of President Roosevelt you might be better able to make your arguments against the Obamasiah infrastructure plans, etc.
Others argue that it wasn’t simply economics, despite his failings there, that made Roosevelt so popular.