Saw this post on twitter of Peter Finch from the Movie Network – "I don’t have to tell you things are bad; everybody knows things are bad..." and that is pretty much how I feel.
The stocks are crushed and the only solution (we are told) is to give 700 Billion to wall street bankers. We have a bailout tracker and npr states.
The Bush economic team has been saying for weeks that the financial
world as we know it would end if a rescue plan was not put in place in
short order.
And after record losses by points on the stock exchange yesterday, today we hear they may have a new plan and stocks are rebounding this morning. Banks are being rescued and purchased.
And while all of this is going on, well, we are getting angry. Really angry. But it is a very hard anger to direct. And for the euphemistically named "main street" where we all live, we don’t quite see the problem yet.
No really, so all of the investment bankers are going broke. OK, so
if we went out of business I’d be broke. Nobody bails me out, and I
don’t even have a home in the Hamptons like they do! What is with the
double standard?
Tightening of the credit markets you say? That we won’t be able to get a home loan or a car loan or a business loan on inventory! Well gee, those are all ASSET BACKED LOANS.
What makes you think banks will stop doing that? And if so, give me a
bill in congress that insures direct to consumer and direct to business
loans.
And lets talk about the lady in this Washington Times article
When Deb Freitag applied for a credit card so she could replace her
roof, her leaky refrigerator and her old dishwasher, she was offered a
$1,000 line of credit, not the $5,000 she needed.
Note
the "$5000 she needed part." Does she really NEED 5k? When I was in
that position, I bought a used washer and dryer for $25
each. They didn’t match. But they worked well after we cleaned them out
with bleach. My point is there are alternatives, unpleasant
alternatives that people don’t want to consider. But alternatives that
were the ONLY option for me at one point in life.
The end of leveraged buyouts? Oh darn. Again – why do we care?
This might be a Texas thing. 8 of the 9 house representatives from the Houston area voted against the bailout. And I don’t blame them because as I said previously, if voted in, this would be a Republican Led 700 Billion Tax Increase
even if payment of taxes is deferred to our kids. And I would
absolutely be sure my representative was painted with that
tax-increase-brush. Call a spade a spade.
In Loren Steffy’s column today he says
We may not have that long.
"Banks are falling right and left," Robert McTeer, former president of
the Federal Reserve Bank of Dallas, told me. "I expect that will
accelerate, and we’ll have more stock market days like today."That would be Monday, when the Standard & Poor’s 500 Index slid the
most since October 1987 and the Dow Jones industrial average fell the
most points ever, wiping out $1.2 trillion in investor wealth.Somehow, that makes the $700 billion we would have used for the bailout seem paltry.
Here’s
the thing. This is basically a class war between the haves and have
nots. Yet this may wipe out $1.2 trillion in investor wealth. I get
that. But why should the lower class cover this for the upper class? And the lower class doesn’t have the money anyway so this is just debt to be passed to our children.
I repeat – this is just debt to be passed to our children. Not cool.
It is no accident that the bailout bill failed in the House of Representatives.
They represent the people and the people are MAD. I am sure the Senate
would vote for it. But until someone tells me why I care in plain
English that I can understand, I stand against a bailout for the fat
cats on wall street with their insurance-renamed-something-cool-pretend-markets.
Remember assets folks? Lets look under that rock again. We might find something.
In closing, I realize that real people are hurting. And my 401k,
small that it is, has gone down. But that is better than throwing my
children under the bus. It is better that we weather the storm now, and
perhaps leave something for the future. ~tightens seat belt~
The only people that need to worry about their 401k going down are people that will be retiring in the very near future.
Why is it that folks don’t understand that investing in the stock market is a long term investment? There are highs and lows, but over a long term you are sure to make money.
A 401k has never been a get rich quick scheme, so why would anyone that isn’t in their sixties be concerned about their 401k losing value?
That said, these market valuations are all speculation anyway, 1.2 trillion wasn’t lost, confidence was lost in the value of those stocks effected. Any company that provides physical palpable value and makes a profit is not going to go out of business due to this fluctuation.
The market will correct itself, whether it is now without a bailout or in the future with one. We are plugging the dam with our collective fingers and we don’t have enough of them to stop all of the leaks. The dam will burst one way or another, the question is do we waste our future on ineffective stop-gaps, or do we allow the market to correct itself sooner rather than later?
Posted on September 30, 2008 at 11:52 am.
Paul – You are spot on with your comments on the 401k. The catch is that most of this is an emotional (over?)reaction and people are gasping at the market moves.
One GOOD thing that Washington is talking about is increasing the FDIC insurance rate to 250k which would give small banks a bunch of new money to loan.
Thanks for the comments!
Posted on October 1, 2008 at 8:02 am.
Ed – Thanks for the shout out on the Twitter post and the great clip from Network and congrats on making the Chron’s list of commentaries. I love that Network clip because it seems to capture this time perfectly.
I don’t agree with your anti-rescue (love the semantics!) mantra, believing that a responsible intervention can help to create a market for distressed loans that are valued at zero today. Post-Enron accounting laws require that banks reflect a “zero” on their ledgers for those loans because there is no market for them, even if there are underlying assets that eventually can be sold. Secretary Paulson is a savvy capitalist who believes that we can speed the creation of a market as long as the owner of the distressed assets is not itself distressed. Hence the government’s involvement.
Is it likely that given time, the private sector would innovate and a market would blossom? Absolutely, but that would take years. Thousands of large businesses and hundreds of thousands of small businesses would go out of business without access to capital. Uninsured deposits would vaporize and millions of American families who have failed to save a 6 or 12 month emergency fund would quickly drift into poverty, unable to afford necessities such as food and shelter.
But enough with doomsday. Due to very poor communications, the whole initiative has been sullied as a “bailout,” in which the rich get made whole at the expense of responsible folks who pay their bills on time. That’s not the case at all. Shareholders in WaMu woke up Monday to find that their shares had no value. Tens of thousands of investment bankers are out of work and many are broke after the implosion of their company stock.
These people won’t suddenly get made whole. They money won’t flow back into their pockets. They are toast. The money will simply be used to speed the process of creating a market.
If you read The Great Crash: 1929 by John Kenneth Galbraith, you will see that the Great Depression was also preceeded by a real estate bubble (that one in Florida, too!) and it was the government’s INaction that led to a decade of economic destruction. For all you conservatives, just remember what happened shortly thereafter — the U.S. government adopted a neo socialist position in the New Deal era. So be careful what you wish for when rallying the little guy.
Sorry to ramble!
Posted on October 1, 2008 at 2:08 pm.
Note the Preamble to the Constitution, which all Americans are supposed to agree with if they live within its sovereignty:
We the People of the United States, in Order to form a more perfect Union,
(1) establish Justice,
(2) insure domestic Tranquility,
(3) provide for the common defence,
(4) promote the general Welfare,
(5) and secure the Blessings of Liberty to ourselves
(6) AND our Posterity,
do ordain and establish this Constitution for the United States of America.
Question: Would a re-investment by the tax payers (a rescue bill) in the original mortgages stolen by Wall Street so that they were protected in the local communities and states where the property actually is and the capital from that revenue is returned to the taxpayers of those communities, would the 700 Billion (not as a bailout) qualify as enhancing any of the Preamble’s six covenants?
Posted on October 1, 2008 at 5:20 pm.