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Funny thing. Just a week or two ago, I was gathering information, quotes and headlines for a blog entry about how bad our economy had gotten despite what the politicians claimed.
Oh, and just to set the record straight, from MY research, McCain wasn't parroting Bush when he said that the "foundations of our economy are strong". McCain said it first last January. Then in February Bush said it and in March, Cheney said it. So it was the administration parroting McCain.
Face it, both camps, like most politicians, are liars.
Now back to the economy.
As I'm sure you've all heard, if Congress doesn't approve a bill to bail the banks out of their self-induced troubles, the world is going to end. "They" want the Federal Reserve to loan the Treasury Department (U.S. Taxpayers) $700 Billion so that the Treasury Department (U.S. Taxpayers) can purchase all those sub-prime and bad mortgages that the banks bought.
President Bush in his speech pointed out that only the Federal Government has the money and patience to hold on to them until the (home) market returns to normal and the mortgages could be sold at a profit.
There's the first problem. The home market IS back to normal. Those bad mortgages were all written when the housing market was in an unsustainable bubble. The bubble burst. Prices are just now getting back to normal. If prices go back up to what Bush calls "normal" then it'll be another bubble and we'll start this all over.
Giving the banks an out is wrong. Not having to take responsibility for their greed means that there will be more incentive to take high risks in the future as they know that "the government will bail us out".
Second is the power this bill gives the Administration.
"To provide authority for the Federal Government to purchase and insure
certain types of troubled assets for the purposes of providing stability
to and preventing disruption in the economy and financial system and
protecting taxpayers, and for other purposes."
That is the summary of the discussion draft of the bail out bill as of today.
Sounds rather innocent doesn't it?
I guess if I had to pin something down as what's wrong with it, it would be the "and for other purposes".
I'm thrilled that Congress has seen fit to eliminate part of the original Bush-Paulson-Beneke bail out. The fine print of the bill forbade ANY judicial oversight. Meaning that no matter the administration did, the courts had no say about it.
The original also made it less clear than this version does that the Treasury Department and Federal Reserve would have the power to nationalize ANY business as long as they claimed it was to stabilize the economy.
It never uses the "nationalize" but when a government buys a private business" there is NO other name for it.
Nationalization is something done by Socialist and dictatorial governments, not by democracies and federations.
The original proposal positioned the Administration such that any business or industry could be acquired with no notice and no options for the target to use for defense or protection.
Basically as it stands, the bail out still let's those banks off of the hook, makes the tax payer responsible for that $700 Billion (about $2,000 per family) and still leaves the door open for nationalization of industry, albeit with judicial oversight and the ability for a business to try to fight the government in court.
Ralph Nader had some good thoughts on the problem. He's calling for putting the regulations back into place that Bill Clinton and Congress took out back in 1992. All this crap that has collapsed our economy stems directly from that deregulation. He proposes to go further. Outlaw the selling of mortgages and loans. If you write a bad loan, you're stuck with it until it is settled. No more bundling the bad ones with good ones and passing the bundle on to the next sucker bank.
An average citizen on one of the forums pointed out an obvious alternative. If the Federal Reserve has the money to loan the U.S. Taxpayer to bail out the banks... then why not have the Federal Reserve do their job and loan it directly to the banks? Answer: Because the banks don't want to be saddled with that high risk debt. They want a get out of jail free card. Let the taxpayer take the hit.
The above solution of course flies in the face of the way Washington works. The answer to everything is more government!
While I normally don't think much of celebrities spouting off about things out of their area, I DO listen. Mostly it is the attention they get from the media that pisses me off. Over all, I rank their opinions right up there with my next door neighbors or people at work. We all have opinions.
However, Whoopi Goldberg has a different alternative to the bailout. Again, because the Federal Reserve can create as much money as we want to borrow, her solution is to bypass the banks. Give the money to the taxpayer by paying off up to 50% of all of our first mortgages. Only the homes we live in. The 2nd, 3rd, 4th, 7th houses? You're on your own and shame on you. This would spend the same about money play money at the Federal level. However, everyone would suddenly gain a lot of equity in their homes. Those with subprime loans could then refinance at better rates and lower payments thus pretty much eliminating the "bad loans".
The lower payments we could have would put discretionary funds into our wallets and boost the economy as well.
The banks could get free of the results of their greed.
Homeowners could get lower payments.
Homeowners would actually be getting something tangible for the bailout.
The economy would get a boost.
I'm one of the ones that got a loan during the boom. Due to various things we were considered sub-prime (just barely.)
I bought our home in 1998 for $78,500. When appraised for a refinance in 2006, it appraised at well over $250,000.
Countrywide tried to get me to go for $250,000. I held to my guns and borrowed $140,000. That paid off the original loan with Countrywide, paid off a lot of old credit card debt my wife had brought into our marriage, paid off our vehicles and left us some cash for things around the house.
Countrywide also tried to get me to go for an adjustable rate loan. They pressured me so hard I finally got fed up and told the guy if that if he mentioned it one more time, the deal was off and I'd go elsewhere. As I told him, "Interest rates are at their lowest in 40 years. Why would I take an adjustable rate when the only direction they can go is up?"
As a result, I converted my VA home loan at 7.25% 30 year fixed to a 6% 15 year fixed. While we got rid of a number of payments, our monthly payment doubled. With the payment schedule we're doing, it'll be paid off in about eight more years. Just about in time for retirement.
Yes it hurts sometimes. Especially now that my wife has been laid off of her job. That cut our income in half.
Sadly though, too many people (prime and sub-prime) fell for the housing bubble and took out low rate ARM mortgages, and watched as their house payments doubled in some cases. As they defaulted on their loans, their banks and other lending institutions discovered that the debt insurance they'd bought was worthless (fodder for another blog post) this being what REALLY brought down the house.
So here is Washington, using Big Government as the answer (again) to bail out private industry at tax payer expense (again) yet even a few John and Jane Does can come up with better answers.
As Will Rogers said "It's a good thing we're not getting all of the government that we're paying for."
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