[Newsbot]

Filibuster Cartoon
Title: US goes commie (click to view)
Date: September 21, 2008
The American government engaged in the largest-ever public-private transfer of wealth this last week, handing out billions of dollars to a handful of failing lending and banking corporations, and propping up several others by essentially nationalizing them, buying up the majority of their stock to make the US government the primary shareholder.

It's all part of a severe and dramatic financial crisis that is gripping the United States and Wall Street at the moment. Major financial corporations are failing, which under a capitalist system is unfortunate, but should be allowed to occur. But because these companies are so huge, and so many individual interests, careers, are threatened by their meltdown, the American government has to resort to what are basically socialist solutions in order to alleviate the pains. I'm not saying it's necessarily a bad or good thing, but it does beg a lot of questions about how sustainable a major capitalist economy is in the modern era.

Check out the useful and highly informative site below if you find all this as confusing as I do.

[tritium]

Yeah, so true.. but how come you didn't post the image here...?

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[KyleEverett]

This should be the final nail in the idea that Republicans are small government or supporters of capitalism. Even John McCain has issues with this move.

[BartSimpson]

This whole mess is very convoluted and complicated. (Bear in mind I work for an investment firm, okay?)

About fifteen years back the Democrats went on the warpath against "redlining" which was the result of banks not lending to people who had bad credit and who lived in "blighted" neighborhoods. The banks countered that these were risky loans so the government countered by allowing the banks to issue risky loans with high profit margins to cover projected losses and then REQUIRED the banks to issue these loans. Add in the 14th Amendment and now those loans had to be available to everyone who could get a Federally backed loan.

Now the folks who invested in these loans were big investment firms and insurance companies. Who invests their money in big investment firms and insurance companies but PENSION FUNDS.

The bailout then is to maintain the viability of a whole lot of pension and retirement vehicles. If the government doesn't clean up a mess they essentially created then we have a whole bunch of retired people on welfare and retired people are the #1 voting bloc in the USA and no one, Democrat or Republican, wants to deal with the political ramifications of a collapse in retirement funding.

Thus the bailout prevents a collapse of retirement funding and it also helps to keep Federal mortgage monies flowing into low-income neighborhoods to recipients who have bad credit.

Myself, I say let it all collapse and we bite the bullet and deal with the tough times NOW instead of deferring the bad times for a generation.

[Chumley]

It is true that one of the popular tools of demonizing the banks has always been how hard it was for the poor to get a mortgage.
It has been a common theme in many movies.(what was that movie with Samuel L. Jackson holding a sign outside a bank that said "I am not viable"?
So if the banks let all these people who shouldn't have gotten loans have them because of the popular opinion of the people, whose fault it it?

[tritium]

Hey this all sounds so familiar... the Canadian government has reduce requirements for Canadians to buy a house..

I wonder how long before this mess effects Canada or Alberta where many families need two people to work just to pay the mortage.

Of course they recently changed those requirements, raising the standards. But they still have people in houses they can't afford.

Canada is usually a couple of years behind the USA..

[BartSimpson]

Chumley wrote:

It is true that one of the popular tools of demonizing the banks has always been how hard it was for the poor to get a mortgage.
It has been a common theme in many movies.(what was that movie with Samuel L. Jackson holding a sign outside a bank that said "I am not viable"?
So if the banks let all these people who shouldn't have gotten loans have them because of the popular opinion of the people, whose fault it it?

The banks were ordered to give out these loans. It got out of hand, yes, but the fault is that the government told the banks to lower their standards in the first place - that's why we have a $1 trillion dollar hit to the economy and no one has gone to jail - because they more or less did what Congress and the White House told them to.

[dog77_1999]

BartSimpson wrote:

This whole mess is very convoluted and complicated. (Bear in mind I work for an investment firm, okay?)

About fifteen years back the Democrats went on the warpath against "redlining" which was the result of banks not lending to people who had bad credit and who lived in "blighted" neighborhoods. The banks countered that these were risky loans so the government countered by allowing the banks to issue risky loans with high profit margins to cover projected losses and then REQUIRED the banks to issue these loans. Add in the 14th Amendment and now those loans had to be available to everyone who could get a Federally backed loan.

Now the folks who invested in these loans were big investment firms and insurance companies. Who invests their money in big investment firms and insurance companies but PENSION FUNDS.

The bailout then is to maintain the viability of a whole lot of pension and retirement vehicles. If the government doesn't clean up a mess they essentially created then we have a whole bunch of retired people on welfare and retired people are the #1 voting bloc in the USA and no one, Democrat or Republican, wants to deal with the political ramifications of a collapse in retirement funding.

Thus the bailout prevents a collapse of retirement funding and it also helps to keep Federal mortgage monies flowing into low-income neighborhoods to recipients who have bad credit.

Myself, I say let it all collapse and we bite the bullet and deal with the tough times NOW instead of deferring the bad times for a generation.

That might be part of the problem, but how do explain all of those lovely condos in Miami and everywhere else? I went to Chicago and they had over 40 condo towers being built! I seriously doubt the government was pressuring anyone to build those. Those go to generally wealthy people.

Let's face it. The investment banks got too greedy. One too many loans on top of loans and on top of loans to make an extra 1% profit (which would be alot though).

If it were up to me, I would have a you must have x cash to loan out x amount of money. Sure, the flow of money slows, but we are already adding over 1 trillion dollars, it would soften the blow. You wouldn't have to worry about multiple banks collasping. One bank goes and that's it.

Sigh, we can keep throwing more and more money at the bad debt, but it is just gonna get bigger. We are just stalling it and getting nothing but inflation in return.

[Chumley]

BartSimpson wrote:

Chumley wrote:

It is true that one of the popular tools of demonizing the banks has always been how hard it was for the poor to get a mortgage.
It has been a common theme in many movies.(what was that movie with Samuel L. Jackson holding a sign outside a bank that said "I am not viable"?
So if the banks let all these people who shouldn't have gotten loans have them because of the popular opinion of the people, whose fault it it?

The banks were ordered to give out these loans. It got out of hand, yes, but the fault is that the government told the banks to lower their standards in the first place - that's why we have a $1 trillion dollar hit to the economy and no one has gone to jail - because they more or less did what Congress and the White House told them to.

Ok, the banks were ordered to do so by the government, who did so because of popular opinion. Indirect, but still pretty much the same I think.

[dino_bobba_renno]

tritium wrote:

Hey this all sounds so familiar... the Canadian government has reduce requirements for Canadians to buy a house..

I wonder how long before this mess effects Canada or Alberta where many families need two people to work just to pay the mortage.

Of course they recently changed those requirements, raising the standards. But they still have people in houses they can't afford.

Canada is usually a couple of years behind the USA..

Well I don't think were in as bad as shape as the US when it comes to lending. Canada still has far stricter rules then they do but I do agree 100% that we're headed for some bad times. It's only common sense.

Even if you are lending to people with good credit when you take into consideration the fact that there are people who are getting mortgages for $400,000 plus over 40 years with 5% or less down you're just asking for trouble. There are people that I know who have $2500 to $3500 mortgage payments and they only make about $5000 to $6000 per month on a combined income. What happens if one of them gets sick or loses their job?

It's sad to see. They have these big houses but there's nothing in the fridge or cupboards. They have no furniture and if their lucky they might have one 10 year old car between the two of them. Credit cards are maxed out and if anything unexpected happens such as having to pay a big dental bill for the kids then it's utter chaos.

The bubble has to bust some time.

[Tiler]

When I took a "Modern Social Issues" class, I was told redlining was an evil, racist act committed by greedy bankers against poor blacks, and I was told that this was a problem that needed to have government legislation passed to make loans virtually mandatory.

I figured this was a pretty bad policy, and I told the teacher, who pretty much said 'That's nice. Now about the laws that will be needed...' Now that the stuff has hit the fan, I'm almost tempted to shoot off an e-mail saying "I told you so."

And I also agree with the fact that the bankers got greedy, and that they got greedy for a good reason; there was no risk. They'd make lots of money or the government would step in and save them if they screwed up. This, like the cartoon says, is pretty much the opposite of having a free market. And it only encourages further risk-taking.

[CanadianJeff]

You know right now I'm accually working in a financial solutions (the fuzzy word for collections) department right now inbetween larger jobs and my goodness are you right.

This move really screams a bit stupid on the part of the government but JJ does have a point. With nations getting larger and larger in this day and age how can you really stop from having large organized banks or businesses. Maybe capitalism will have to evolve to something new in the coming ages.

But that point aside this also really highlights for me what I hate about liberal politics. Sometimes they just don't think about the full picture becuase they are fighting too hard against social injustice.

Yes it's absolutly true that minorities have a harder time getting loans out of the bank. Even when you control for income. What shouldn't have been done is making it easier for EVERYONE to get a loan. Instead regulations should have been put in place that pre approves people for certain mortage rates if they make a sufficient income. Basically hold banks accountable to ensure that people who really can pay do get their mortage.

Giving the poor houses becuase they are poor is of course not going to work.

[Psudo]

I'm amazed how much this supports the idea that neo-conservatives are socialists re-packaged for public consumption. I can't imagine how Bush thought this was a good idea.

It also reiterates what I don't like about either Presidential candidate this election: neither of them really supports big spending cuts, which is the principle relevant issue of our times: the US Government has it's thumbs in way too many pies to remain stable.

[waddizzle]

Please never mix the Latin and Cyrillic alphabets like that again. It hurts.

[Kjorteo]

I'm...not especially happy with the bailouts.

Let me put it this way:

I make $11,000 a year. $11,000. That's below the poverty line in quite a few states. I get by by living in an area that's cheap to live in (this would never work in, say, Seattle,) not having a car, and watching what I spend. My means are quite limited, but I live within them. Somehow, I've even found a way to send $100 a month to my bank to put into IRA CDs, because my job doesn't have a 401(k) or any sort of retirement plan, so it's basically up to me. My CDs, much like my lifestyle in general, are probably meager compared to what others out there have, but they're something. I'm poor, but responsible, and surviving.

However, this is a story about people on the complete opposite end of the spectrum--people who are unbelievably wealthy, irresponsible, and now not surviving. People who made more money last month than I will have in my natural lifetime got consumed by greed and threw their fortunes around, because more could potentially become even more still. They messed up, though. They didn't know when to quit and they lost it all on one bad gamble after another.

Now here's the part of the story I don't like: As a taxpayer, I have to chip in to bail them out. I make $11,000 and have had to figure out how to make that work, and have done so rather well for years. These people make almost a hundred times that, I'm sure, and somehow managed to completely fail, and I'm the one who ultimately ends up punished for it. I have to pay money that I quite honestly don't have to people who quite obviously have no idea what to do with it. It's like the an alternate version of the story of the ant and the grasshopper, where the government forces the ant to give all of his food to the grasshopper and the grasshopper lives happily ever after and the ant dies of starvation.

As far as the candidates, I have to admit that I'm rather partial to Obama's outline--it's not an actual plan yet, but he's at least said that whatever plan we eventually do come up with should be temporary, hold the greedy investors accountable for this mess, and have some sort of compensation for the actual people who have to pay now. I do like his "put Main Street ahead of Wall Street" theme.

Edit: Oh, and the best part about all this is that my job involves weaving throws for people who are apparently wealthy enough that they have unbelievable amounts of money to spend on throws of all things. ( http://www.furaffinity.net/view/417740/ ) Historically, luxury-based businesses don't do especially well in times of financial crisis--who wants to buy a throw when money is harder to come by and could be better spent on practical things?--so I can only hope this doesn't end up derailing the weaving business badly enough to kill it. Wouldn't it be lovely if I had to pay irresponsible rich people with money I don't have because their irresponsibility made me lose my job?