Tuesday, September 23, 2008

How about a solution that benefits the people (gasp!)

I am angered today by the continuing rhetoric from Washington on how to solve the financial sector meltdown. The powers that be want to spend Americans tax dollars (hard earned by the average American) to bail out big Wall Street firms. Under the current plan, this includes paying CEOs multi-millions of dollars for running a business into the ground. Is this fair to the average person who works very hard? Will this even solve the problem (it really just transfers debt from one balance sheet to another). Luckily, several legislators have jumped in to question the bill before congress.

Why not give the money directly to the homeowners to pay their mortgages? If the big Wall Street firms still cannot survive, let them die but do not take money from Americans to give to companies who have flawed business plans. From my limited understanding, it appears that under such a plan, the average American would be able to keep their house, most of the big banks would benefit from lower foreclosure rates and not fall into chaos and the average American would then have extra $$ to further stimulate the economy. Note that the entire deal could be done via immediate tax cuts. After all, aren't Republicans supposed to be about small government and lower taxes? What sense does it make to have a big lender financially solvent while having millions of people out on the streets, no longer having a home?

There are lots of smart people in the financial sector. Warren Buffett warned of the time bomb the derivatives practices would have on the sector over five years ago. He called them financial weapons of mass destruction. Why did some chose to ignore him? What about those who did heed the warnings? There is certainly a lot of good opportunity to see which banks and mortgage lenders are left to take the business lost by their insolvent counterparts.

I need a beer.


  1. According to US Census there are (about) 125m households in the USA. Let's assume that 20% of Americans are in trouble (25m). If the bail-out is 1 trillion (which it will but the time the dust settles) that would make (average) $1,000,000,000,000 / 25,000,000 = $40k per (in trouble) household.
    Personally I agree, it would make a lot more sense to give $40k to those how are in trouble (and it doesn't need to be as a lump sum - so it's not a $1 trillion hit) to help them get out of financial strife.
    At the end of the day (from my understanding) most of the problems were created by Wall St (and financial institution) greed, and it seems - from the mess on Wall St over the last few days - like the greedy fuckers are desperately trying to cover their losses and make more money from the market whilst it is bouncing.
    If they get bailed out in 2008, they will do it again. If they are left out to dry now, maybe they will learn their lesson!

  2. D,

    If the poisonous mortgages floating in the global finance sector are not removed it will melt everything. Blame wall street, blame main street, blame the housing market, blame the fly by night mortgage lenders and all institutions that bought this toxic paper, end of the day we have a mess.

    Paying mortgages is an even more dangerous thing as many home owners were never viable owners. They were given 120% loans that were destined to fail and then allowed to double down on dual Escalades on a home equity loan.

    I would rather fix the problem than melting down the US and Global economy.


    Ted :)

  3. Ted:

    In others words, a no-win situtation for the average hard working American tax payer? If the fed bail out now, Americans get the bill later; if they don't, they get the bill now. Either way the bill is paid by the people.

    I hope someone at least can mitigate the long term problems this is going to have. I really feel sad as most of my best friends are Americans and their future is now indebted for decades to come.

    I guess what really bothers me most about this package is that some executives from the people who engineered the poison paper derivative instruments of debt are going to get big salaries and/or severance packages and my friends (including you) are going to pay for them. It's a perfect storm.

    If it fails, come up to Canada! It's not quite as warm as Texas but out carbon emissions should help that in about 25 years.



  4. D,

    It is ugly but it sure beats having another great depression. I am pretty sure no CEO of a failed firm is going to see a payday here. Given this wiped out many folks retirement, there is going to be shareholder hell to pay. What comes around goes around.

    Ted :)

  5. I am a wall street investment banker. I can't tell you what my strategy was but it rhymed with "fillage and root". I take your money, save it in my personal bank account and let the company fail and there is nothing you can do to get your money back. This is legal and I win, you lose. If I pretend to be sorry, your government will bail out the company I worked for which means I can do this all over again. You guys are in the wrong business and people like me will always be on top. Get used to it.

  6. Why the fuck do you care about Americans? They are in trouble, not you.

  7. Obam-bam-bam-bammas gonna fix it!


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