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>Bailout: Bad Idea?

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I haven’t kept up with everything around this bailout, so I was hoping some people here can help me out. Here’s my thought: Let the bad institutions fail. They made bad investments and the problem will not be fixed by letting poorly run corporations continue to mismanage investments. Other institutions have invested conservatively, and other banks have been responsible in approving mortgages and loans. These institutions should survive, the rest should be allowed to fail. The good institutions might even buy the bad ones to manage investments and mortgages properly. Where is my thinking wrong here? Are we rewarding failure? Does anyone believe in capitalism anymore?

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Discussion

8 thoughts on “>Bailout: Bad Idea?

  1. >Although it cuts at the heart of not only conservative economic principles, but the capitolistic system as a whole, I would concede that some modified form of “Rescue Package” may deem necessary in scope of this terrible mess we are in.

    Posted by hylander | September 25, 2008, 12:58 pm
  2. >I’ll add one other item. I am not proposing that the government regulate what all companies pay their CEO’s. That would certainly lead to problems. But when the government writes a 700 billion dollar check to bailout irresponsible business practices in the financial markets, it has the right to do whatever it wants to. 700 billion buys you a lot of say so. Otherwise, let them sink.So I’m in agreement with you, Jeff, on the government not controlling CEO salaries. I am saying, however, that in this situation, in the financial markets in particular, the government not only should, but better regulate things if their spending taxpayer money on someone else’s greed driven problem.

    Posted by Mark Mathews | September 24, 2008, 6:20 pm
  3. >”That will result in a poorer quality executive in the future.”I’m not sure how much poorer quality CEO we can get than what our current situation shows us we have. At least in the financial markets. Have you not seen what is happening to the financial markets? I guess then a really top notch CEO won’t take a $5,000,000 a year job because he can hold out and get $10,000,000. Give me a break! I’m sure he would be glad to have the former. But when things are run so loosely and people can manipulate the system (not just Fannie and Freddie, there’s a lot more than that) then they run amuck screwing everybody in their wake knowing they will be gone when the fit hits the shan and there will be no consequences. This Capitalistic greed is way out of hand and if it is not reigned in will ultimately implode, which it is currently doing. You can say what you want but the evidence speaks louder than Republican rhetoric. I’m not sure you realize what you’re asking for. Capitalism is great and I believe it’s the only way. But unbridled greed and unchecked Capitalism leads to just what we have today, a real mess.The recent situation in the financial markets that has gone unchecked CANNOT be left unregulated IF the government is going to bail it out. Now, if we leave it to implode on its own, then I agree with you, no regulation. But something has to give somewhere. If we pay the bill, we need regulation. If the companies go under then let each of them live and learn. But in no way should we leave it alone when we are having to write a check for 700 billion. That’s ridiculous and fiscally irresponsible.

    Posted by Mark Mathews | September 24, 2008, 4:41 pm
  4. >Govt doesn’t need to be involved in what companies can pay their CEO’s. That will result in a poorer quality executive in the future. What I’d rather see them do is hammer people like Barack’s campaign advisors from Fannie and Freddie who came up with the rigged system of bonuses which ended up in them lying about the numbers in order to hit their targets. The vast majority of their income was in bonuses under this scheme. The Dems are focusing on CEO salaries because it fits nicely with their class warfare agenda but its a diversion. The Dems don’t want to focus on things such as the fact that they were the ones who blocked tighter regulation and oversight of Fannie and Freddie. This 9.11.03 NYT’s article got some attention yesterday. One Representative in favor of Bush’s proposal is quoted as saying, “‘The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,’ Mr. Oxley said at the hearing. ‘We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,’ the independent agency that now regulates the companies. ‘These irregularities, which have been going on for several years, should have been detected earlier by the regulator,’ he added.” The article continues, “Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. ‘These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,’ said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ‘The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.’ Representative Melvin L. Watt, Democrat of North Carolina, agreed. ‘I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,’ Mr. Watt said.”I am opposed to govt bailouts in principle although I am open to the possibility that there may be something the govt can do here. But not this current bill that is being proposed. It is nothing more than We Gotta Do Something! no matter what that something is. Who knows what’s in this bill? And Bush has already said he’ll sign it. Ridiculous. Crises like these are always exploited to further a socialist program which ends up killing us in the long run. The wrong-headed, crippling, socialist programs of FDR and LBJ were all foisted upon us because we had to do SOMETHING about various crises whether there actually was a crisis or not. Socialism cannot win at the ballot box so it must be advanced in the courts and crisis legislation. I’m hearing that there is a provision in the bill that would allow the courts to alter contracts after the fact. Wow! So you’ll never really know what you’re getting into even if you have a contract. Do we really want to end contract law in America? McCain has an opportunity to prove himself by opposing the current legislation if he wants to continue with this reformer maverick persona. But if he does I expect Obama to try to blunt what McCain would gain from that by pulling some sort of “me too.”

    Posted by Jeff Wright | September 24, 2008, 12:05 pm
  5. >Govt doesn’t need to be involved in what companies can pay their CEO’s. That will result in a poorer quality executive in the future. What I’d rather see them do is hammer people like Barack’s campaign advisors from Fannie and Freddie who came up with the rigged system of bonuses which ended up in them lying about the numbers in order to hit their targets. The vast majority of their income was in bonuses under this scheme. The Dems are focusing on CEO salaries because it fits nicely with their class warfare agenda but its a diversion. The Dems don’t want to focus on things such as the fact that they were the ones who blocked tighter regulation and oversight of Fannie and Freddie. This 9.11.03 NYT’s article got some attention yesterday. One Representative in favor of Bush’s proposal is quoted as saying, “‘The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,’ Mr. Oxley said at the hearing. ‘We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,’ the independent agency that now regulates the companies. ‘These irregularities, which have been going on for several years, should have been detected earlier by the regulator,’ he added.” The article continues, “Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. ‘These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,’ said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ‘The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.’ Representative Melvin L. Watt, Democrat of North Carolina, agreed. ‘I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,’ Mr. Watt said.”I am opposed to govt bailouts in principle although I am open to the possibility that there may be something the govt can do here. But not this current bill that is being proposed. It is nothing more than We Gotta Do Something! no matter what that something is. Who knows what’s in this bill? And Bush has already said he’ll sign it. Ridiculous. Crises like these are always exploited to further a socialist program which ends up killing us in the long run. The wrong-headed, crippling, socialist programs of FDR and LBJ were all foisted upon us because we had to do SOMETHING about various crises whether there actually was a crisis or not. Socialism cannot win at the ballot box so it must be advanced in the courts and crisis legislation. I’m hearing that there is a provision in the bill that would allow the courts to alter contracts after the fact. Wow! So you’ll never really know what you’re getting into even if you have a contract. Do we really want to end contract law in America? McCain has an opportunity to prove himself by opposing the current legislation if he wants to continue with this reformer maverick persona. But if he does I expect Obama to try to blunt what McCain would gain from that by pulling some sort of “me too.”

    Posted by Jeff Wright | September 24, 2008, 12:03 pm
  6. >I have to agree with OSO, though I understand the disdain felt by Hylander.What is not being discussed here, and I think OSO is alluding to, is the fallout when these institutions fail. The way the current system operates with hedge funds and credit leveraging many of these institutions are so far in bed with one another that when one falls they all begin to fall. We are seeing the first dominoes fall presently. Moreover, these are the BIG dominoes. What the government is trying to do, without making it too obvious, is cover their own ass because they have let the greed and corruption of Wall Street go long enough without regulation that it’s all coming to a head. They also know this has been going on. If they say they don’t then their even dumber than I thought. And the government knows full well that there will be thousands of little people with 401K’s, investment portfolios and retirement accounts that will go bust if this continues. Sure the FDIC is there, but that doesn’t mean loads of people won’t get hurt. OSO points in the right direction when he says, “a monster has been created who is destroying those who created it.” However, the monster wasn’t created by these people, it lives within them, GREED. They have given in to greed and the “live for today” mentality and those kind of business practices eventually catch up. Well, that time is now. It’s all catching up.So, while I think it stinks that the taxpayer has to bail out these crooks, to avoid the average taxpayer getting destroyed, it is necessary. That said, I think the FBI should investigate these crimes and people should do time for them. This is nothing more than “Fat Cat” greed, extremely dishonest and irresponsible business practices, all done under the name of Capitalism. Well, they’ve left a vital component out of Capitalism, personal responsibility. Now that they have shown they cannot practice personal responsibility, STRONG government regulation needs to take place. I know many conservatives will balk at that, but my response would be, you’re way obvious doesn’t work!!!I’ll go one further. I think the Dems are right on making sure these “Fat Cat’ crooks don’t walk away from this situation with 20-30 million dollar bonuses! To think that the government is actually going to buy bad loans made by people who profited from them and put that burden on the taxpayer really gripes me. What would gripe me even more is after the bailout and the stock prices rise for these companies, is that the CEO’s take credit and get “performance” bonuses. I think their bonuses should be 10-20 years hard time for unarmed robbery.

    Posted by Mark Mathews | September 24, 2008, 11:14 am
  7. >oso,Post hoc ergo propter hoc. Although your premise is a slippery slope argument, which can be valid, with all due respect, I do not think it sound. Here is why.In our capitolistic economy, businesses will fail, and some rise and flourish. That is the basic nature of our economic system. I do not believe that if one, or several large corporations fail, that it will usher in a domino effect of successive failures to other businesses. Failure is a natural occurence to our economic system and especially when bad business is conducted. It seems inevitable in this instance that this would happen. The Markets, trading, buying, selling and economic growth will all self correct as it always has. I strongly disagree with the bail out, not simply because “joe-taxpayer” is going to be paying some of this bill, but because it smacks at the entire premise our our economic system. European governments learned long ago to stay out of similar private businesses as they already learned the hard way.I think the bail out is a bad idea and could possibly cause some financial backlash that you and I are going to end up paying for for a very long time.

    Posted by hylander | September 24, 2008, 12:50 am
  8. >There is a contagion happening here. The failure of bad institutions would lead to the failure of mediocre institutions and then the failure of good institutions.Think of it this way – a monster has been created who is destroying those who created it. The problem is that the monster is now so big that the collateral damage is getting worse.I’m no fan of Paulson or Bernanke here (both of them assured the market in the last 12 months that things were fine) and the terms of the bailout are problematic. But a bailout is needed.

    Posted by One Salient Oversight | September 24, 2008, 12:05 am

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