Currently, the United States is in what some would call financial turmoil. There are many factors as to why this happened as well as the realization that there are very few viable solutions. Now this whole thing has become a partisan playground and Wall Street might as well be Baltic Ave. So what the hell is going on?
Usually, when a country is in an economic slump, one of the tried and true ways for rebounding the financial situation is to have a nice little war. Jobs are created, nationalistic pride booms, and viola! The economy is climbing back up into the black. This time it's a little different. We're already at war...a war that has been anything but a stimulus package. Many believe that this is where the country started it's downward slide. I might be one of them. But let's focus on the situation at hand.
A few years ago the housing market was doing quite well. Mortgage companies came up with a really sweet sounding deal: Adjustable Rate Mortgages. The ARM appealed to many Americans who would not normally have been able to buy property. Once the fine print was read, this deal was potentially very destructive. But that didn't stop people with the excitement of being able to afford a home. Who could blame them, really? As predicted, the interest rates began to soar and foreclosures and defaults on these loans spread to record levels. Banks and other financial institutions reported losses close to half a trillion dollars.
President Bush stepped in and signed into law an economic stimulus act which would give taxpayers $300 to spend and help boost the slumping economy. That, and a few interest rate cuts were implemented in early 2008 hoping to ease what was rapidly becoming a crisis. Well-known institutions like Bear Stearns, Fannie May and WaMu were beginning to fall. Investors and corporations alike were starting runs on banks.
Again, the Government decided to help out these failing financial institutions with a 700 billion dollar bailout plan. A bill that has had major opposition and on Sept 29 was defeated in the House...mostly due to the Republicans. The Stock Market responded as shocked as you'd expect, falling over 700 points. A funny side story is McCain's laying claim to be the architect and savior of the nation by attaching himself to this plan...only watching it get defeated by his own party. D'oh!
So. Let's get this straight.
Greedy mortgage companies distribute what could only be called criminal-level mortgage deals to buyers who, sadly, could not afford their own home. This caused a massive amount of default and they were left in huge debt. Um, why didn't the story stop there? Yes, it was a HUGE loss, but didn't these companies get what they deserve? Isn't this some sort of karma?
Listen, the markets and economy are cyclical. History can tell us this very easily with a quick glance to the books. So here we go, attempting to put 700 billion on the line. Mind you, we're not a nation who's books are in the black, either. With the war effort, we're way way way in the red. THEN there's the economic stimulus package, and THEN there's this 3/4 trillion dollar buyout to stabilize the economy. I. Just. Don't. Get. It.
Isn't this like teaching children that they're all winners and everyone gets a gold star? Yes, it builds their immediate self-esteem but hardly prepares them for the harsh world where you actually have to work hard to win? What preparations are you giving the kids for the future? Believe me, we've already seen the work ethic of years past all but disappear. Just think what's going to happen to corporate executives when their parents aren't around to argue their raises for them.
Someone explain to me how saving the economy is better for America in the long run? Someone explain to me how questionable actions without consequence will better our society as a whole. Some people win, most people lose. The real question is, what can you learn from losing and apply it to your future?
Nevermind, you'll never have to find out.
Subscribe to:
Post Comments (Atom)
7 comments:
On the other hand if the retards that got the loans just paid them....you know, like me and you, there would be no mess.
Adults should be responsible for their actions.
ATTICA! ATTICA! ATTICA!!
Or not paid them, had their homes foreclosed and dealt with the consequences.
Try to live within your means, dammit.
stupid stupidness....
anyways as I was saying...I just was telling Larry last night that I don't understand why everyone's all upset Markets are cyclical.
It's like you're in my head...
Have to agree with sweet Steve, there's plenty of blame to go around:
Greedy lenders and irresponsible borrowers empowered by our Government got us into this mess.
The root of the problems stem from our government(both parties) which failed us here, mainly in the name of political correctness dating back to Carter.
Here's a great article from the Boston Globe of all places :
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/
The key part of this article is this:
"The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods...
Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. 'Lack of credit history should not be seen as a negative factor,' the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as 'valid income sources' to qualify for a mortgage. Failure to comply could mean a lawsuit."
Talk about teaching "children" that they're all winners and everyone gets a gold star....
As a side note, Barney Frank's involvement seems criminal to me --Fannie Mae’s main defenders in the House, a recipient of more than $40,000 in campaign donations from Fannie since 1989, and was romantically involved with a Fannie Mae executive Herb Moses. With his loud opinions on this crisis, I'm surprised the media outlets don't bring up these obvious conflicts of interest. Or maybe not so surprised....
Link to the Globe Op Ed article:
http://www.boston.com/bostonglobe/
editorial_opinion/
oped/articles/2008/09/28/franks_fingerprints_are_
all_over_the_financial_fiasco/
Those are some great points Joe O. I've read a lot of articles pointing back to the Community Reinvestment Act. Apparently, the origins of this act began with trying to make sure that lenders did not just lend to people in wealthy communities. I can see that this Act ended up being a promotion of affirmative action where loans had to be given to people who really couldn't afford them and people who don't know what it is to be financially responsible. It's rediculous that the government forced lenders to make these changes and give these loans to people who didn't qualify. I'm ok with the intentions of the Act because everyone deserves to own their own home if they are able to afford it, but leave it to the lenders to determine people's credit-worthiness. Don't require that the lenders give a certain amount of loans to minorities just because they are minorities. I'm pretty sure, but most loan application don't even have Gender or Race on the application. The lender makes a determination based on your current income, how long you've worked in your current industry, how much credit you currently owe, and how much credit you are capable of charging. I'm no financial expert, but those seem like pretty good ways to determine how much of a loan you can make. Don't let me become the president of a bank because I'll require everyone to submit to me their monthly budget and proof that they've lived on that budget for 6 months in order to give them a loan. If you wanted a loan from me, I'm going to make sure you are trustworthy.
Now, as for the bailout...I'm not a big fan of it, because I'm not conviced that the people responsible for the crisis are being punished. From what I understand about the bailout is that the government will basically start to own these houses, but I'm unclear about what they are going to do about these bad loans. I guess I just need to keep reading.
More news and opinions at 11.
Post a Comment