Why The Bail Out Must Happen

UPDATE: Well, it appears that the bail out bill failed to pass. So much for the great leadership of John Ass Wipe McCain. With the DOW plunging close to 600 points, I find it interesting that the House Republican’s really think they did their savior John McCain any favors. Oh well. I’d also like to ask, what parts of the current bill did John McCain advocate and get? None as far as I know. So if this whole market goes south, we know where we can firmly place the blame.

There’s a lot of angst on both sides of the isle about the $700 billion dollar bail out package being voted on today. While this is a pretty painful vote and difficult for the average taxpayer to understand, in the end, it has to happen. For those that say, “But we aren’t the ones that caused this,” I can only say, “the average American, while not a direct cause, has benefited from the poor regulation and speculation by Wall Street.” Here’s why.

Sub Prime Lending Allowed Housing Prices to Climb at Historical Rates. By greatly increasing the demand for housing by making it easier to qualify for a housing loan, housing prices overall grew by record levels each year. And despite the downturn in 2001 by most of the market, the real estate market continued on a trajectory that would only make the crash that much greater. Any time you allow someone to qualify for a loan that will require 50% of their take-home income to pay, and not require a 10-20% cash down payment, you run the risk that the borrower will default. However there were a lot of people that cashed out and made bank during this time - average tax payers - and funded lifestyles beyond their previous dreams. Let’s not forget that.

The economic recovery from 2001 until 2006 that drove stocks hiigher was largely fueled by easy credit and low interest rates. The days of easy credit are over - as they should be. But let’s not place the blame entire on Wall Street. How many people have bought into the 24 months no interest, no payment mentality on crap like flat screens, vacations, furniture and new cars. This is stuff that can’t be resold, loses it value almost instantly, and in end, suffers from a high emotional fall-off factor.

During my brief stint as a credit counselor  I would talk to 6 to 7 families every day, and their story was always the same - they spent, spent, and spent, without saving, and then something unexpected happened, and they were stuck paying credit with credit (not much unlike the current Bush administration).

I’m sure there are a million other reasons for our economy reaching a point like this. The main thing I want to note, is that the taxpayer crying that this wasn’t their fault, is unfair, considering we’ve all enjoyed the economic house-of-cards that the Bush years have built. Next time we might be more wary when housing prices are climbing by 15% a year and it’s easy to get 0% interest on an Caribbean cruise, after outfitting our living rooms with Dolby 7.1 and 62″ of plasma.

Since We’re Talking of Bail Outs, Why Not Bail Out Main Street?

I feel like I’m back in the fall of 2002, when George Bush and Team were painting a picture of urgency. The promise of a mushroom cloud blossoming on the horizon for anyone skeptical of going to war with Iraq. Now we’re being told of almost certain doom again, a financial crisis not seen since the great depression. We must act now.

Deja vu.

Now hold on a second. What is the urgency? No one can paint me a picture of what this gloom looks like? I’d like to know why we can go eight years with a Bush White House and nothing get’s done on health care because of the cost, but the financial crisis is something we need to rescue in the eleventh hour of a lame duck president’s term?

$700 billion. That’s a lot of cash. Why not skip the bail out of Wall Street and bail out Main Street. For starters, I have some lousy debt I’ve been paying on now for 10 years - it’s called student loan debt, and guess what? It’s such bad debt that despite making every monthly payment it never goes down? Wipe that out, and it would free up a nice chunk of my change that could start to lubricate the economy.

What Paulson Wants for Wall Street

I’m not a genius. My doctorate in economics from Stanford is a fake. Allen Greenspan is no hero of mine. He should be tried for war crimes - like every other Republican that profited from war and has sank the ship.

No, I’m just a pissed tax payer who’s spent the day listening to the idiot Paulson try to explain why he should be given $700 billion to bail out his friends, approximately $2300 of which will be mine.

Why don’t we just admit it right now, once and for all, we are not a capitalist society - not in the sense that you might think? In fact by the end of the week, the government very well may own a good chunk of the shitty finanical assets on bridges to nowhere for all we know. No, we are a socialist economy but one that operates on a fucked up model of rewarding a small 2% with huge bonuses, and screwing the other 98% with unstable job growth, no healthcare, no energy plan, and no retirement plan.

Here’s the basics of what it appears Paulson is proposing. I’ve broken this down into a simple, straight forward outline that makes absolutely no sense to me - and if it makes sense to you - then check in with your doctor.

Paulson wants…

You to feel sorry for the rich. Wall Street made a bad mistake - in fact a series of really bad mistakes. These mistakes made Wall Street very rich for a time. Hedge fund managers flourished in a world where they could move and grow money that they didn’t own, that had no assets backing them, all while avoiding paying any significant taxes. Now it looks like fate is calling. The house of cards is going to fall, and suddenly the prospect of these new rich bastards jumping out of their buildings - well, that reminds us just a bit too much of 9/11. 9/11 is something we want to avoid repeating. So we need to bail Wall Street out. Of course, this is preemptive. These rich bastards haven’t actually lost all of their money just yet, they just face the prospect that they will - by Friday of this week, if we don’t act now, on Monday. Paulson’s plan that he’s presented Congress, asks for $700 billion dollars. He wants no strings attached. He wants to be able to hire and award money to people based on his own discretion. Basically, he wants Paul Bremer powers to do to Wall Street what Bremer did to Baghdad. No one should be looking over Paulson’s shoulder. He’s terribly sorry that the taxpayer has to deal with this and of course, he can’t guarantee that this plan will work, but we have no alternative. If we don’t act now, every one’s 401K, money markets, retirements, insurance, life savings, bank accounts will all be down the drain. And if you’re not scared shit-less by the end of that list - well, Iran’s gonna get nukes and use them on everyone very soon. Now of course, Paulson is also warning against any restrictions that might say, if you get bailed out of your bad debt, the taxpayer might want the CEO to make no more than, say $500,000. No that would be unfair - to the CEO. A CEO of a company that hasn’t failed, but will fail if not bailed out, should be able to be paid whatever his or her board of directors feels is appropriate.

Here’s my thought - and this is why my major in economics is phony - why not let all of these guys go bankrupt. Keep our tax payer money for a few weeks, and then get an awesome deal in bankruptcy court as these assets get auctioned off? This means we avoid any issues of CEO pay. And everyone knows you get a much better deal at a bankruptcy auction, then you do the first day of the “Going Out of Business Sale.” With all of these huge corporations bankrupt, suddenly it might be easier for the little guys to compete. Capitalism is spread, and jobs are created. Now I realize this might hurt a lot of “rich” people but the truth is, there are already a lot of people hurting. And isn’t it time we spread a little bit of that hurt to Wall Street.

UPDATE: I just recieved an email from the people at ImpeachBush.org. Sign the petition at www.votenobailout.org and make sure Congress doesn’t just hand free money over to Wall Street.

Feds Pump Billions into Economy to Support Trickle (Something) Bushonomics

On Friday, August 10, 2007, the Feds pumped billions into temporary reserves, following a similar move the day before, as reported by Jeannine Aversa, AP Economics writer.

About the only thing that hasn’t backfired (yet) for Bush is his laissez faire economic policy. Bush needs one more year of steady economic growth and he’s desperate to not see this go into the tank as well.

The only problem - economies that spend and cut taxes while waging an expensive war, eventually bust (recall the 80’s followed by the early 90’s). Who knows just how much more pumping in this current bull market can take.