Note to readers: Sorry for those of you who have come to depend on my analytical brilliance to decide how you feel about issues of the day, but my PC crapped-out the other day and I have been challenged to find time and opportunity to post. My part-time workplace actually blocks computer access to most Internet sites, and I do not have a "back-up" 'puter ready to go. Today I am using my wife's laptop which I find awkward and clunky. Still, the show must go on!
The stock market has been volatile and the news is grim. Stories of people losing their life savings and businesses threatening to lay people off are now the daily staple of media reports.
In the news today there was a story about a woman who had invested all her money in Wachovia Bank stock. She lived in her own home in an affluent suburb, and was living a good life funded entirely on stock dividends. Now she is living in her son's basement.
People like me - who have already given up full time jobs in favor of retirement - are worried that our dwindling nest-eggs could disappear entirely - and we too will be forced to live in our children's basements. (I have even stashed a couple of hundred bucks in a sock just in case the ATM system fails and I need beer money).
It is not fun to be dependent on a fixed income, (especially if you are not getting fat trust fund checks like Paris Hilton ) or, working a part-time retail hellhole job making small money and putting-up with the odious public.
But, gentle readers, be not discouraged. Life will go on. Business cycles are an historic fact of life and this too shall pass. We will survive this crisis somehow. It will not be fun, but that doesn't mean that you cannot have any fun. As we work our way through these coming hard times I shall share some of my cost-cutting secrets with you my loyal readers - all four of you!
Now to the hard analysis of the bail-out:
This meltdown of credit markets can be traced directly back to the affirmative action goals of the federal government, which mandated that lenders give mortgage loans to people who could not afford them unless the equity value of the property kept rising. Freddie and Fannie were forced to guarantee these shaky loans.....
Combine the government's social engineering experiment with the greed and chicanery of the investment banks and mortgage companies and you get a trillion dollars betting that the houses that were held as collateral in these contracts would increase in value indefinitely, and nobody would lose. Well they didn't, and lots of people lost a lot; then the walls came tumbling down....
The solution:
Much as it will hurt, the government needs to let the businesses that risked their survival on bad loans fail. People will lose jobs. The gov't needs to help small businesses by extending credit to them, but not buying bad debt.
I will lose my stockholder equity in companies like AIG. I hate that, but hey I knew it was a gamble. There should not be guarantees for gamblers.
The people who bought houses that they couldn't afford are no worse off than they were before, and they have had a nice house to live in for a while. The leadership of the failed companies cannot be allowed to walk away with money when everyone else loses. Contract shmontract. Employees of failed companies will need to find work elsewhere. Government representatives who guessed wrong and made the situation worse must resign (and it would be nice if they took the blame in the manner of Japanese tradition of honor (sepicu).
5 comments:
I am clearing space in our basement for you and mom.
A corner near the catbox?
see and you thought you would be left out in the cold with only a bottle of sierra nevada in a brown paper bag
I suppose the "affirmative action" to which you refer is the Community Reinvestment Act, passed by congress back in the Carter administration. If that is the true culprit, can you explain why it has taken almost 3 decades to produce its bitter fruit?
As an aside, I doubt this contention will sit well with your black readers. Oh! That's right.
Lefty, you can go back to your cave and suck on this: I do not have to explain any of my assertions however ill-informed or poorly researched they may be. However, the legislation you cited was the gateway drug for subprime addiction to bad loans. Like a boil, the infection festered for years and then burst forth spattering gobs of noxious pus all over Wall Street and Main St.
Unintended consequences some times take decades to manifest themselves.
All I know is what I read in the shadows on the wall. Wouldn’t the real “gateway” be usury (righteously condemned by medieval Christians)? And why is “gateway” necessarily a bad thing? The pejorative sense comes from the marijuana/hard drugs analogy, and it is widely misunderstood and misused. Even everyday use of cannabis need not lead to Needle Park. The problem is that the toker becomes accustomed to breaking the law. Obvious solution: legalize pot!
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