I’ve mainly stayed out of the way when it comes to the market rescue package. I’m no economist and I figured there were better sources than me where you could get your information regarding the issue.
That said, there are some common sense things that I’ve been itching to say as I watched elation slowly turn to bitterness and anger regarding the package and the perception that it’s some big pay-out to Wall Street fat cats.
We are all Wall Street. Everyone with a 401k, or even a Money Market account, will be taken out if nothing is done. That’s not hyperbole. If no deal passes, all those businesses you’re invested in through your Mutual Funds stop making money. The people they employ go out of work. Those people cannot pay their mortgages. And it’s a vicious cycle that accelerates as it spirals downward.
This is not handing $700 billion over to someone on Wall Street. This is investing $700 billion in severely devalued (and very undervalued) assets. Not every mortgage is in default. In fact, very few are in default. We’re buying the risky ones, not only the defaulted ones. The overwhelming majority of the ones we buy with our $700 billion will be paid in full by responsible homeowners. In fact, the way things are right now with these mortgage backed securities being so severely undervalued, a good likelihood exists that we will wind up making money on the deal in the long (very long) run. A bank can’t take that chance and just wait around, as the President explained, but the government can.
In my mind, the only real valid purposes of the federal government, when you come right down to it, are to provide for the protection of the citizenry and to provide for trade.
It’s ugly and it’s not going to be quick, but this rescue package is valid even within the worldview of someone who values limited government. Get the government out of everything else, but the government does need to protect the financial system at this point. Especially as misguided government programs and practices went a long way to causing it.
There are those who will scream about “the free market” in this situation, but Fannie Mae and Freddie Mac were never “the free market” in the first place. They are government entities run by liberals based on liberal social engineering rules and attempting to make a profit. That combination never works. President Bush tried to fix it in 2001 and 2003, and John McCain tried to fix it in 2005-2006. Democrats tanked all efforts, and now we’re left to pick up the pieces.
And now we’re left to pay the price because there’s nothing else we can do. Standing back takes us all down with it. That’s even more ugly.
For insight into the problem and the proposed solution, I’ve found the best place to turn is JustOneMinute.
UPDATE: When I was thinking about this post I realized that I did not address a specific portion of the plan that I do vehemently oppose: Another payout to the deadbeat borrowers who just got $300 billion dollars a couple of months ago. Predatory borrowing, and the 1977 Community Reinvestment Act that made lending to unqualified borrowers mandatory, is what got us into this mess. And don’t come crying to me about people being thrown out of “their” houses. Those aren’t “their” houses. Those are the bank’s houses, and after this package is approved they will be “our” houses. Please explain to me how it’s “their” house when “they” put no money down on a house “they” knew “they” couldn’t afford and then stopped paying “their” debt. And I’m not talking about the family who is doing the right thing but falls on unexpected hard times. I’m talking about the people who saw free money with no questions asked (literally) and pounced. If you put no money down, you paid nothing to principal, and then you stopped even paying interest, it’s not your house.
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