One day Henny-penny was picking up corn in the cornyard when–whack!– something hit her upon the head. “Goodness gracious me!” said Henny- penny; “the sky’s a-going to fall; I must go and tell the king.”
We all have heard the old English fable about a chicken who thinks the sky is falling and how it has been adapted to our modern language to demonstrate panic about events that either cannot occur or ones that are beyond our span of control.
So, when we look at the Federal Government, which is considering a $700B bailout of the financial markets, we have to wonder about the ramifications of doing this versus doing nothing at all.
Why The Government Should Not Do The $700B Bailout
On the conservative side of the isle, many people are voicing the opinion that we need to give the markets time to correct themselves. Capitalism, they argue, does not perform well with government intervention. The Short Sale Blogger provides a very concise summary of this viewpoint.
Why The Government Must Do The $700B Bailout
In a series of three blogs, the Tallahassee Real Estate Blog writes a compelling argument in support of the bailout. As a matter of fact, it shows why the sky is really falling. The middle blog in particular is very entertaining as it provides a cartoon which shows how the Subprime Mortgage Market brought about the near-collapse of our entire financial system.
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Bailing Out The Banks? Actually Bailing Out America!
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Discover How The Sub Prime Mortgage Mess Has Destroyed The U.S. Financial Markets – 1 Funny Cartoon For A Not-So-Funny Affair
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Discover How The $700B Bailout Kills Three Birds With One Stone
What Our Readers Think About The $700B Bailout
OK, you’ve seen arguments for the $700B Bailout and you’ve seen the arguments against, it’s time for you to take a stand on this issue and share your thoughts with the rest of us. Please use the comments below and let’s see where we are!
{ 9 comments… read them below or add one }
Tender spot hurting a lot? Other side too? bruises on your face and body throbbing? Is that blood running out your nose, skirt above your head in the wind, panties torn and soiled, titties swelling and turning blue by the minute, lost on the roadside, hoping not to die? Did you recognize the tail lights of the limo that threw you off? Was it the same limo that picked you up at election time, promising a good decent clean ride? Will you ever learn? Last time these guys did this to you, your babies were killed in Iraq and your retirement fund spent to do it, your taxes went up, you did not get destroyed by the weapons of mass destruction, they were never found. Poor little America. Our heart-felt prayers from Canada go out to you!
Wow Uncle B. A combination of Stephen King and James Joyce, but your point is well made. Just don’t think that you won’t be affected by it too. Should the U.S. financial system collapse, many have speculated that Canada will feel the affects as if we were joined at the hip (as opposed to joined at the border
. )
I think myself, like a lot of people, feel a little mis-informed, or don’t know which information to trust on this issue. I hear a lot of things like the worst depression since the 30’s, but I wonder if this is really the case. Maybe someone with an economics degree can explain a few things to me, but I don’t understand how the whole economy can be crushed because people can’t pay their mortgages. From my perspective, the money is still in the US economy, it’s just the home-sellers that made money off the loaners/investors. Why should the taxpayers have to pay back the banks that have been making so much money off of them?
The way I see it, if the housing prices are all down, it’s time to buy real estate. It’ll go back up and the buyers will make a fortune.
How is that a depression?
I don’t think anybody can know if the bail out package is the right thing to do, it’s too big. Capitalism probably can’t get us out, but capitalism didn’t get us into this either–this was created by a concerted effort to bring home ownership to as many people as possible. A noble goal poorly pursued.
You have to assume most of this 700 billion will be wasted. Much of it will be given to people who shouldn’t get it. But it may be necessary to keep the banks afloat. Or not, I really don’t know.
Yes, exactly: those wanting to buy real estate should take hold of the chance right now. But those wanting to sell real estate are worse off now. The economy is currently in a recession – but it’s a self-regulating organism – and I think it’s strong enough to cope with the current slowdown.
Caleb, you ask some wise questions. You asked “From my perspective, the money is still in the US economy, it’s just the home-sellers that made money off the loaners/investors. Why should the taxpayers have to pay back the banks that have been making so much money off of them?” And if that were the only issue, I would say the taxpayers should not enter into this. However, the real issue is described in Bailing Out The Banks? Actually Bailing Out America!, where it shows that right now the money markets are frozen due to low liquidity. Business credit lines are about to run out (this is what shut down several of the big WS firms last week. What happens when it shuts down other companies that rely on credit to pay their employees? This is WAY bigger than the housing industry, it is EVERY industry that relies on credit (All of them do).
Paulsen’s solution is to buy these mortgages for forty cents on the dollar and then sell the mortgages when the market stabilizes. Many economists actually predict the government will make a profit on the deal. So, it’s not the “taxpayers giving money to the banks,” rather its the “tax payers buying mortgages from the banks, discounted by more than half.” So if half the mortgages fail, the government should still make a profit. This is not like the other bailouts where the government won’t recoup any of its money.
Tim, you think most of the bailout money will be wasted…. I hope you’re wrong. If you read my comment above, or check out http://www.manausa.com/blog/29/government-bank-bailout/ then I think you will see that there is a good chance for the government to actually profit on this.
My read of the bill is this:
We’re opening a checking account in the name of the treasury department and putting $700 billion starter money in the account. Thereafter, the account is theirs.
This isn’t a loan to the treasury, it’s a grant. Nothing will ever be paid back into the general tax pool from which it was drawn. Nothing will be paid back to the taxpayers and in the event that any profit does result, it will belong to the treasury department.
The original bill as submitted even included a clause that forbade any judicial or administrative review of the spending of the monies granted. Therein lies the real crux of the matter… it’s a power grab. If we needed this so badly, there would have been no need whatsoever to include such a clause and in fact lowered the chances of the bill actually going through.
I have yet to plow through the new 110 page version of the bill but if Congress didn’t remove that clause and all language like it from the current version of the bill then we’re already at game over. Paulson writes himself a check for $500 billion, kicks back $200 billion to whoever wrote the bill for him and there’s nothing anyone can legally do about it.
You don’t write laws like this optimistically. It can’t be open ended, it can’t be unlimited and it can’t be unmonitored. Anything else is treason.
“You don’t write laws like this optimistically. It can’t be open ended, it can’t be unlimited and it can’t be unmonitored.” Well said Kyle!