Opinion
Wall Street bailout rewards failure
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Our hapless leaders in
As students, we have already been asked to bend over for the next umpteen years. The burdens of today have been put on our backs: the cost of the war we cannot afford, student loans we cannot afford, health insurance premiums we cannot afford and a monstrous deficit of $9.8 trillion we cannot afford. All this, so that when we retire we will be forced back into the workforce because our social security accounts will likely be bankrupt.
What we absolutely do not need now is to add another $700 billion to the national debt. The argument is one of simple — and flawed — Reganomics: If we bail out the top, it will trickle down to us, the student and the prospective homeowner.
It is critical to understand that this bailout is for mortgage-backed securities, not actual mortgages. These are bundled mortgages cut into separate investments, so instead of knowing exactly what you have invested in, you have invested in small portions of property spread throughout the
There is an alternative that is being passed around: Bail out homeowners! Instead of bailing out the rich Wall Street execs so that hopefully the money will trickle down (and I must point out that trickle seems excruciatingly slow), we can start at the bottom and trickle up. In fact, with the same budget we could bail out everyone who is facing foreclosure and still have money left over to help refinance the loans of people who are likely to face foreclosure. Not only would this help the people we want to help immediately, it would also solve all of the other problems. The banks would then have money needed to reactivate the credit market, bad loans would disappear, and loans on the books would be properly valued because the underlying asset — the home — would be appraised at the time of refinancing. Best of all, we would then avoid all of the future costs of foreclosures. This would put seven times more money into the economy than the previous stimulus package, and it wouldn’t even increase our total debt — it would simply shift that debt from a private one to a public one.
The apparent issue with the aforementioned plan is the relatively slow flow of money into these collapsing banks. The bailout plan would supposedly save the implosion of the banks, but because no one knows how much all these mortgages are worth, the current bailout plan proposes hiring a whole bunch of Wall Street lawyers and creating a mess of red tape and bureaucracy to figure out exactly how much money each company would receive and where to allocate it. If you believe the banks are going to collapse within the week, the bailout plan will not save them.
In this case, what is good for our generation is good for the economy as a whole. Why haven’t the geniuses in charge figured this out?
For the same reason Dick Cheney didn’t protest the war — they’re the ones who stand to benefit. We must understand that our generation is not the one that stands to gain here, but more likely the one that stands to suffer. And we must act accordingly.
George Mayer (gmayer@wisc.edu) is a sophomore who is undecided.
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The blame for this must be shared with those who have decided to live above their means. If you’re carrying a balance on your credit card, you’re part of the problem.
No one is impressed with your stuff, so quit posing.
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Who cares? No bailout, that’s all I can say.
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George,
The melt down of the home mortgage lending system (Fannie Mae, Freddy Mac, major banks and anyone holding the commoditized loans) was caused by a systemic problem dating back 3 decades. The root cause or thread origin lies back in 1977 when the Carter administration enacted the Community Reinveatment Act. (http://en.wikipedia.org/wiki/CommunityReinvestmentAct) It was politicized as helping the “poor people achieve the American dream of home ownership”. The requirements for prospective borrowers to have 20% down payments, a reliable job, and little other debt were ‘relaxed’. The easy money began to flow.
Under the Clinton adminstration in the 1990’s, our lawmakers again saw fit to ease lending requirements and and allowed the increasingly risky loans to be packaged in groups for resale. The banks that were assessing the risk of each loan they wrote could then sell the riskier loans in bundles quickly into the ‘subprime’ market. The banks writing the loans were no longer responsible and culpable if the new borrowers couldn’t meet the monthly mortgage payment. Risk was decoupled from responsiblity. With Clinton administration cronies Franklin Raines and Jamie Gorelick running Fannie Mae and lining their pockets with millions of dollars in bonuses in the late 1990’s, the flow of easy money accelerated. http://www.washingtonpost.com/wp-dyn/articles/A41165-2004Sep22.html
Enter the new decade and century. Alan Greenspan, John McCain, and others expressed concern with the increasing risk to the nations financial health posed by risks and corruption intrinsic within Fannie Mae, Freddy Mac, and the subprime mortgage market. Their valid and accurate assessments of a gathering financial disaster were demagogued again and sneeringly dimissed by the Democrats. The flow of easy money continued building like a rogue wave headed for the shore.
The Bush administration pushed for tighter lending requirements and greater constraints on Fannie and Freddy. (http://www.washingtonpost.com/wp-dyn/articles/A41165-2004Sep22.html ) Legislation to do that was brought before Congress. A Democrat controlled Congress denied there are any financial risks and refused to support the needed legislation.
Thus, our last opportunity to staunch the financial tsunami was demagogued and thrown away. Now the tidal wave has broken. Many financial houses, from the smallest individual home owners to the greatest of century old banks and financial institutions, have been swept away. More will fall in the coming days, too damaged to be repaired.
Today we sort through the wreckage wrought by 30 years of Democrat devolution of a once-robust and conservatively managed home mortgage lending system. Today a Trillion dollars ($1,000,000,000,000) of our tax money is deemed essential to begin the clean up of this mess, as Barrack Obama, Joe Biden, Nancy Pelosi, Barney Frank, and Harry Reid continue their demagoguery.
In high irony and hypocrisy, Today the Democrats in House and Senate berated conservatives for their “free market, unfettered capitalist debacle”. As the good socialist democrat Mao Zedong said, “A lie repeated a hundred times becomes the truth.” I’m sure we will hear this Democrat lie many more times in the coming weeks. And somewhere Chairman Mao is nodding his head and smiling…..
Invuctus Maneo
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Is the typical liberal argument when they don’t know what the hell they are talking about is to blame Dick Cheney or George Bush?
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The real proplem is over spending by congress and individuals. We need to live within our means and stop spending money we don’t have. What happend to people being responsible for their own actions in this country!
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Invuctus Maneo, this “crisis” did not occur during the Carter or Clinton administrations, it occurred at the end of the Bush administration. You can stop defending this president, because his record is a disgrace and his party has proven (again) better at legislation than administration.
The problem, as I understand it, is not that too many “poor” people bought houses (which is likely good for the country), it’s folks in Florida, California and Nevada willing to pay 5x what their house should be worth based past recent market gains in equity.
Well, that equity was never realized and these morons are holding big mortgages on houses that have lost value, lots of value. Therefore, in some cases, it’s cheaper to foreclose than continue paying the inflated mortgage.
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“Bail out homeowners!”
You mean those who gambled that house prices would go up forever and took out loans that they wouldn’t be able to pay back?
Those “homeowners” and their “liars loans” can live uder a bridge for all I care. They can just declare bankruptcy and start over.
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“it would simply shift that debt from a private one to a public one.”
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury.
— Sir Alex Fraser Tytler (1742-1813), Scottish jurist and historian, professor of Universal History at Edinburgh University
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So under your plan, I could go buy a house today that is WAY too expensive for me, not make one payment, go into foreclosure and then get bailed out because I am having trouble making payments?? That sounds great!! Move over Bernanke, David Mayer is coming and he has ideas!! You are an idiot.
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Anonymouse 12:05pm,
Those who fail to learn the lessons of history are doomed to repeat them. I stated verifiable facts and supplied historical and factual references. My summary is accurate. Your empty diatribe is just that.. empty.
You came to the hallowed halls of UW-Madison to learn. Examine all of the facts, not just what agrees with your personally held beliefs. The historical evidence of Democrats screwing up an effective and conservatively managed home mortgage lending system over 30 years of demogoguery is there for all to examine. That Barrack Obama, Nancy Pelosi, and Harry Reid are desperate to avoid responsibility is blatantly apparent. One lone Demoocrat has shown integrity, however. Rep. Artur Davis - Alabama has publicly stated that democrats were quick to defend and slow to recognize the risks and recklessness inherent in Fannie Mae, Freddy Mac, and subprime mortgage commodities, when Pres. Bush, Sen. McCain, and Fed Chairman Greenspan were all warning of potential disaster. http://www.foxnews.com/story/0,2933,431209,00.html
It’s ugly. It’s hard to admit. But those are the historical facts. If Rep. Davis can ‘man up’, so can you Anonymouse!
Invictus Maneo
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“Examine all of the facts, not just what agrees with your personally held beliefs.”
Invictus, which of your “complete list” of facts were negative toward the Republican Party? You cannot criticize me for not examining the all the facts or cherry-picking facts that support my ideas when you’re guilty of doing the same.
Did you mention Phil Graham in your facts?
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“this “crisis” did not occur during the Carter or Clinton administrations, it occurred at the end of the Bush administration.”
An acorn does not produce fruit for many years.
BARACK’S ‘ORGANIZER’ BUDS PUSHED FOR BAD MORTGAGES
http://www.nypost.com/seven/09292008/postopinion/opedcolumnists/osdangerouspals_131216.htm
Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.
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youtube video, must see: youtube.com/watch?v=MGTcSi7Rs
Lawsuit in which Obama, attorney for plaintiffs, sued Citicorp to get more loans for minorities/others with bad credit which led to the subprime scandal and meltdown - just google the case name!
Buycks-Roberson v. Citibank Fed. Sav. Bank