Bailout

[josh_oakley]

I may stand alone on this, but I think both Democrats and republicans have it wrong by wanting to bailout the financial industry. It may sound cold hearted, as the fall of a few giants in the industry has destroyed many people's nest eggs, but if there's one thing I've learned, it's pain that teaches us our most valuable lessons. As Americans, we

Comments

[trillinon]

I'm honestly torn. By default, the government bailing out any institution is wrong. It's simply not their place. Companies are allowed to fail, and if they make bad decisions, they pay the price for it. It's what keeps the free market functioning. Without the risk, things would actually grow unstable and unpredictable. This bailout could cause such things to happen.

But, the price if these companies fall may actually be too great for many reasons.

1. Much of the strength of the economy is based on faith in the economy. It's why recessions are hard to break out of, and why bubbles occur. If a major part of the credit industry fails, it will inspire a loss of faith across the board.

2. The marked depends on credit to function. Credit allows for instant liquidity of assets. If the credit industries fail, growth will slow due to the rate at which assets can be leveraged.

3. The mortgages owned by Feddie and Fanny have been collected into assets and sold throughout Wall Street. If these two companies fail, those assets will fail, and the impact will be felt instantly in a very broad sense.

There is good reason why this crisis is being compared to the great depression. I have a lot of faith in America and in our market, but I see the possibility.

Lastly, the reasons for this, and the blame for this, is very broad, but the federal government had a large part to play in it, and as such may have a responsibility to fix it. It was pressure and regulations from congress to get more and more people who couldn't afford houses into mortgages that started this mess. Granted, there is an entire chain of people involved who should have stood up and said, "this is a bad idea", and everyone has a little blood on their hands.

Now, it a $700 million dollar bailout the correct response? I don't know. In fact, nobody knows. Everybody is debating right now. I know it scares me. The idea that we are in any way socializing out financial institutes is bad. The idea that the Federal Government now directly owns mortgage owners' houses is bad. The fact that the overall cost of this is somewhere around $8000 per taxpayer is bad, or that we'll have to go even more into debt as a nation.

And there are other consequences. It's said that if this works out, the government stands to make trillions in the long run, selling back these mortgages to the private industry when things recover. That could be good, but you and I both know that congress will spend that money before they ever see it. Maybe it cynical, but with an 8% approval rating, I'm clearly not the only person who doesn't trust our government.

I've been studying this situation closely, and will continue to do so. Soon, I intend to make one or more posts explaining what's going on, and what I think we as citizens can do for ourselves and for out society.