I know you can hardly wait for my take on the current economic crisis. I’ll be the first to admit, that like John McCain has said, I’m no expert on the economy. Certainly there are a lot of “financial products” out there I don’t have a clue about, but there are some things about the market and the politics around it I do understand.
Some are concerned there’s no real emergency. I can certainly see how one can come to that conclusion. The Bush administration has used this “emergency” concept once too often. As Bush himself famously said, “fool me once, shame on – shame on you. Fool me – you can’t get fooled again.” Some people believe this may be just a gimmick to get a huge chunk for one last parting gift for Dick Cheney’s buddies. This is not out of the question from this administration.
Others believe the government should do nothing, and let the free market take care of itself. This comes from some well respected economists, and I can see their point. I’ve written some on the idea of the “free markets” in this previous post. One economist I listened to this morning on NPR was pointing out that Warren Buffet (no dummy when it comes to economic decisions) had already seen an opportunity and seized on it, and that a buyer had come forward for Washington Mutual (WaMu) in fairly short order. In other words, where there are gaps, they will be filled by people looking to make a buck. And I find nothing wrong with that.
I am also opposed to overly-burdensome government regulation on business. However, the past eight years of constant deregulation has clearly shown us that there has to be a level of trust within the system. I’d like to think that all these big Wall Street firms and publicly traded companies are trustworthy, but we knew from previous experience they are not. Some level of trust and accountability must be enforced. There wasa time when a man’s word was his bond, and a handshake was all that was needed to “seal a deal.” Unfortunately, one can’t count on that today, so we have contracts and a whole contracts law industry.
Having said all of this, it does appear there may be a need to “grease the rails” some to keep the economy from taking a huge plunge, and to prevent the pool of credit from drying up. We’re seeing some of this happen right now. The question would be, how deep could it go, and how long would it last. If it’s a fairly short term occurrence, a few months, the country can weather that. There would be some pain, but we’d get by. The concern is that without some intervention. the economy would go on the skids, and while I agree with those who believe a free market can right itself, the question becomes how much and how long is the pain before it recovers.
I’ll give the people in Washington some benefit of the doubt, and support a bailout that helps mitigate the downturn. However, $700 Billion of taxpayer money, given over to a single, unelected individual with an explicit restriction against any oversight is completely unacceptable. Just like with deregulation, we’ve had nearly eight years of no oversight (and this includes you Democratic members of Congress also), and it has lead to a string of problems now all coming to fruition. So the plan, as proposed by the Bush Administration is a non-starter for me.
First, there are some people who were irresponsible when it came to their mortgage. They bought off way more than they can chew, and there is a price to pay for that. Other people could keep their homes if the lenders would merely lock in their rates at a lower percent. This is better for the lending institution and the individual, and in the cases where this would solve the problem, the banks should allow this. The problem with the original bailout plan was that it provided an incentive for the banks to let the loans go bad, then take a premium buyout of the loans from the government. This could flood the housing market further reducing real estate values, and takes those people foreclosed on out of the real estate market for years to come because of the black mark on their credit report.
Any plan needs to come at this current economic problem from at least two directions. One direction must work on the consumer side to reduce the number of defaults and bad loans. This will help the economy and reduce the total cost of any bailout. On the other side, perhaps purchasing some percentage of an institutions bad debt is acceptable, but that institution has to absorb a portion of their bad decisions. This goes to trust and accountability.
Many people think the government should not regulate executive salaries, but I disagree if the taxpayers are taking a stake in the company (or helping it survive). We purchased a say in executive compensation. Again, trust and accountability. Notice how that theme seems to permeate my thinking. You see, the entire system is really based on confidence in the system, and you can only have that confidence if a level of trust and accountability is restored. Whatever plan smarter people than me come up with, it has to address these issues.
I’m not completely convinced the government can and will do the right thing, and I don’t think anyone is sure what that is, but if we stumble into the right thing, I think we’ll see something of a modest decline in the economy overall for two to three quarters, a leveling off for about two quarters, and then a period of growth. If we don’t figure out the right thing, I do foresee fairly dire consequences for a year or so.
In the meantime, please spare me the bullshit of saying the government will hold these bad instruments until times are better and sell for a profit for the taxpayers…Yeah Right!
Should Taxpayers fund a Wall Street Bailout?
- Absolutely No (50%, 2 Votes)
- Yes with oversight (50%, 2 Votes)
- Not Sure (0%, 0 Votes)
- Yes Without Oversite (0%, 0 Votes)
Total Voters: 4