Monday, September 29, 2008

The "Bailout" Fails

The Emergency Economic Stabilization Act of 2008 did not pass the House of Representatives today, and I think that is a good thing. I'm one of those folks that thinks that the economy will right itself. The big drop in the Dow and other stock indexes today was in reaction to a bailout that they expected but didn't get. If the bailout wasn't expected, the damage wouldn't have been as bad. The "experts", the administration, and congressional leadership told us last week that if we didn't pass this bill on Monday, last Monday, the country's financial system would collapse. Well, the bill didn't pass last week, and nothing really abnormal happened, and then the bill failed today, and the markets did what markets do.

What really needs to happen is that people need to pay their bills. Despite the economic crisis, there are still plenty of folks with full carts at Wal-Mart, the mall parking lot is still packed. Are these the folks are carrying too much debt and can't pay their bills? I suspect some of them are. There are many Americans out there that don't have their priorities strait, they have houses or apartments full of electronics, DVD players and other gadgets, but their debt is going bad. Costing the rest of us money in our IRAs.

They say the root cause of the problem is the decline in home prices. Did anyone stop to think that these houses may have been overvalued in the first place? I over paid for my house, and even with the recent declines, is worth more than it was when I bought it, and it is still over priced. Of course, I didn't overextend myself to buy it either. I don't have a BMW 7 series parked out front (seriously, someone in my neighborhood does) and while I would love a bigger house with some land, I knew I couldn't really afford it, even if I could have been approved for the loan. It is that sort of common sense that more Americans should have used, which they didn't that got us into the financial crisis.

The best part of this scam is that "nobody saw this coming", well, it was pretty obvious if you ask me. I remember that several years ago my grandfather was talking about mortgage backed securities, and how they used to be good safe investments, but they are more risky now, and more people won't be paying off their loans. This was at least 4 years ago. The entire United States government couldn't figure this out back then and make some simple, and cheap, adjustments to prevent this. I'm OK with minor government regulation of items of national importance, that is a good role for government, to be a guiding hand, but not to be in the middle of everything micromanaging it completely. So we know that the government isn't the best at managing financial matters, but if they couldn't figure it out, surely the smart folks on Wall Street could, right? Sure they could, they knew what was going on, the just figured that there would be always be another sucker to pass these securities to after they made some money. What others have called, the "last sucker".

The 700 billion dollar Emergency Economic Stabilization Act of 2008 make taxpayers the "last sucker".

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