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Bloviating Zeppelin: Bailouts?

Bloviating Zeppelin

(in-ep-toc'-ra-cy) - a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

Thursday, September 18, 2008

Bailouts?


How many? How far? No more? What's the limit? From the LA Times:

So far this year, the federal government has put upnearly $30 billion to avert a major financial default by the investment bank Bear Stearns Cos.; committed to investing as much as $200 billion in preferred stock of the loss-plagued finance giants Fannie Mae and Freddie Mac and at least $5 billion in their mortgage securities; and agreed to provide an emergency loan of $85 billion to American International Group Inc. in return for an ownership stake of as much as 80% in the stricken insurance giant.

My first thought is: no. Nothing. No more. The lenders and consumers -- the first wave of our current problems (involving primarily sub-prime loans) -- should have to personally pay for their greed and stupidity. Greed in terms of the lenders (who raked in the up-front fees) and the borrowers (who simply wanted the 3,000-square-foot new home right now and thought the details would simply work their way out later), and stupidity in terms of the borrowers. How can one not think a $5,000 per month mortgage hit will have little effect on their liquidity? Their bottom-line ability to pay?

Sarah Palin has already indicated she's disappointed with the federal government's need to bail out another financial institution. At first blush, I'm in that line of thinking.

And where does it end? The federal government, by way of President Carter and Congress already handed $1.2 billion in federal loan guarantees to Chrysler in the form of the Chrysler Loan Guarantee Act of 1979.

History tell us that, generally, bailouts are busts.

CBS News asks the very pointed and appropriate question: then who bails out Uncle Sam?

We all know that: you and me.

And in the meantime, everything affects everything else. This is one huge, horrible Chain of Consequences.


The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.

Barometers of financial stress hit record peaks across the world. Yields on short-term US Treasuries hit their lowest level since the London Blitz, while gold had its biggest one-day gain ever in dollar terms. Lending between banks, in effect, stopped.

In Russia:

Russia was facing one of the biggest tests of its market economy on Wednesday after it was forced to close its two main stock exchanges to halt a rout that has led to the steepest declines since the August 1998 crisis.

And this shall change, Dear Readers. Day to day.

Be prepared. As I have written, many times (to include the Pygmalion Effect), this can be a True Self-Fulfilling Prophecy.

The markets, I am convinced, are not about Reality but about Thought. What do people think will happen?

Further, do what I call The Logical Extension: combine these current economic times with an Obama Presidency, where this nation will return to the philosophy of Tax and Spend. And massive regulation. The government potentially running the American stock market.

And we have never, ever, taxed or spent ourselves out of economic woes.

Your thoughts?

BZ

8 Comments:

Blogger TexasFred said...

1st, we hang the lawyers..

2nd, we hang the execs, no person in ANY business is worth a $^B *golden parachute*...

3rd, we hang the dumb son of a bitch that authorizes those $6B bullshit bail out contracts...

4th, Sink or swim, I have never heard of the feds doing a damn thing to save the little guys...

5th, vote out ALL incumbents, get a fresh batch of fresh faces and make them painfully aware that they too will hang if they mess up!!

Wed Sep 17, 05:16:00 PM PDT  
Blogger Bloviating Zeppelin said...

I'm definitely on that line. One thing I believe will actually clear up MUCH of our current problem is Tort Reform. And I can sum it up in two words:

Loser pays.

Want to stop ridiculous and unwarranted lawsuits resulting in ridiculous decisions made in terms of liability exposure?

Loser pays.

BZ

Wed Sep 17, 06:27:00 PM PDT  
Blogger Christopher Hamilton said...

These companies put their money in places with large risks and lost the gamble. It's NOT our job to bail them out.

Wed Sep 17, 08:40:00 PM PDT  
Blogger Z said...

Johnson made something like ninety MILLION from Lehman and Freddie and Fannie..........Gee, maybe he can just keep five and help the families he profited from to get lower mortgage payments, ya think? I'm obviously (very, I know) not an economics whiz kid, but I really believe capitalism doesn't work without thinking of the little guy. This MESS is JUST the kind of ammunition the Left needs to continue teaching our kids that capitalism is a bad idea (and they ARE teaching that..a nearby high school has an after school CLUB on the subject, i swear)

Loser Pays

Term limits so NO FAT CATS PADDING THEIR POCKETS

NO BAIL OUTS

Wed Sep 17, 10:44:00 PM PDT  
Blogger Gayle said...

I'm not an economics whiz kid either, but I can understand what's going on here. We taxpayers are being crapped on, as usual! I agree with you, BZ. I'm very happy that Walt and I haven't placed our eggs all in one basket, but the shame of it is that people who had nothing to do with any of this are going to suffer and it stinks! Of course Obama blames it all on the GOP. He doesn't take personal responsibility for anything.

Thu Sep 18, 06:48:00 AM PDT  
Anonymous WMD_Maker said...

Altho I do agree with the let those that did the stupid stuff suffer I have to admit that the bail out of AIG was the right thing to do. AIG has a MAJOR fottprint outside the US. If they had gone under the world economy would have taken a dive. Ifthat had happened we would loose the foriegn investment into the US and lost external US markets for our goods because they wouldnt have money to pay for the goods. This would prolong by a good deal of time the current mess. Bailing out AIG keeps the timeframe of this mess shorter.

Thu Sep 18, 07:39:00 AM PDT  
Blogger shoprat said...

Loser pays would work most of the time.

That and prosecute any lawyer that files an absurd lawsuit.

Thu Sep 18, 03:01:00 PM PDT  
Blogger A Jacksonian said...

Have to love those holding the keys to the debts of Freddie and Fannie: Russia and China. Yup! Lets bail them out to make sure that Russia and China get their money's worth...

I have had it with bailouts. This is America where failure *is* an option. Hell, the country failed the first time out of the chute... called The Articles of Confederation. Not that anyone wants to remember that we are founded on failure. Blows your ego all to hell when you realize that... and then builds it right back up when you realize we didn't let that stop us from succeeding.

Nothing is 'too big to fail'.

You can't regulate a perfect, ever growing economy. You get the USSR if you try. Strangely we have lots of people crying about not enough regulation... and that, too, will fail us. Again.

If you don't like the failures and the business cycle, get rid of capitalism. Then nothing will ever fail... or ever really succeed. You can't regulate it to perfection: that is a direct contradiction of what capitalism is and does. We need failure to wipe out the inefficient business ideas... or asinine federal programs, come to that, not that anyone ever wants to do that, either.

Thu Sep 18, 05:59:00 PM PDT  

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