2008-09-23
Bailout?
Ok. I am not a banker, nor an economist. I understand a little about how this works, but I would love to hear from the familial bankers and construction weenie (haha) what their thoughts are on this. My first take on this is that this is not a solid idea. Don't get me wrong, Heather and I are being greatly affected by this. It turns out that the house we put a contract on, the current mortgage holder of that house is Indymac, which is currently owned by the Federal government. Hence, the large amount of waiting we're having to do, since the mortgage process is now like an extended multi-month long trip to the DMV. The Feds at Indymac even told the seller's real estate agent: "It's taking 60 - 90 days to get around to the paperwork, so don't call us, we'll call you. But you can send in letters and faxes." (I guess they need things to burn?) Anyway, Heather and I are being affected by this like many others, and we're financially sound. What I want to know is, how would the government buying all these "troubled assets" be a good thing? Are we simply "passing the buck" (literally speaking) to the next generation? A report said that, "the aim is for the government to buy the securities at a discount, hold onto them and then sell them for a profit." Anyway, I am just not sold on this idea. I think I'd rather pay the heavy "finanical meltdown" pricetag now rather than wait a generation from now and have China effectively blackmail us with all of the treasury note debts we'll be owing them...talk about a meltdown. Enough of my unskilled rants- speak to us, Oh great bankers and weenie.
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Call me crazy bro...but I think I'm on your team.
ReplyDeleteIf geography speaks to brains any, these guys are geniuses (the are based in Auburn) -- The Mises Institute at Mises.org. They are a group of very pro-free-market economist (think Ron Paul) that subscribe to the "Austrian School." I would consider their views as extreme -- they basically deify "the market" -- but their logic is sound, and backed up by history.
The way I see it, we've not solved a problem, but hit the snooze bar, and thereby made the headache from the next alarm that much worse.
I am interested also in what the bankers have to say.
The only thing I will say with authority, though, is to put your fingers in your ears when either McCain or Obama start speaking on the subject. Both beyond clueless.
The discussion points from both parties are dually noted and respected. For the record I am not a big fan of this bail out in its present form. However (you both knew that the "however" was comming didn't you) what you guys are saying makes sense only if you do not work in the real world. Income is derived from sources that would dry up quickly if we were to face the financial meltdown that would grip us all. One derives their income from the offerings of the people the other derived income from the construction of commercial buildings. What if the congregation cannot work to support their offerings? What if all construction ceases for a time unti the economy rights itself?
ReplyDeleteI have never had to raise crops for a living, but I do not think it is alot of fun. I guess I would lose weight that way, but I am not sure you guys have the "luxury" of those few pounds to lose. What we have here is the classic tail wagging the dog, with the tax payer toting the note for a time until the real estate values rise enough for the government to unload the assets taken in from the banks. That will take time.
Until the time comes that we are all independently wealthy, I suggest you hold your nose and pray that funds will continue to come in so that we can continue to raise our families without having to sell apples or pencils on the street.
As a side note, I wish this thing had spell check, I feel a bit exposed without it.
Keep those cards and letters coming!
I heard a quote on the radio within the past week by Walter Williams, noted economist at George Mason University. "If a building is on fire, who do you call to put out the fire? Not the arsonist." Our government caused this problem (Community Reinvestment Act, sub-prime lending, interest only mortgages, etc.) and quite frankly I do not like the idea of the same group trying to fix the problem. This is more of a personal view than a banker's view. I also work for a bank that is not in any grave danger (at least that is what our CEO keeps telling us). I realize that all of those lending practices gave a huge shot in the arm to Ronny's builders in years past but it should be easy to see now that such mutated lending practices have now turned in to an irreversable Incredible Hulk.
ReplyDeleteWith all that said I agree with Pops that if Uncle does not step in and help in some form then we will all be following the lead of B&A...Ronny, can we fit a cow, 2 pigs and a few chickens in your back yard? How long would it take to fill in the pool?
This will turn around and it will be the blue collar consumers and those that paid attention to the Normans, Thulas, Dorothys and Virginias of this nation that lead the turn around.
Perhaps Warren Buffett will bolster a few more companies as he plans to with Goldman Sachs. Maybe there are a few more Brooke and Heathers out there that will wait 3 months to close on a mortgage loan that is done the right way, that they can afford, and that will ultimately be a small piece of a large puzzle that will have to be put back together as the market has done in the past. Buy local. Support "Mom and Pop."
Personally I'd like to see all of the overpaid CEOs and subprime lenders take the hit on this, let the tax payers take it on the chin, and then let's get back to doing things the right way in a free market economy. I'm afraid though there are not enough people out there that can weather the storm. I'm not sure I can weather the storm but I'll grow corn and beans with the best of 'em if need be. Let's pray that doesn't happen (Leslie would starve!). I don't personally like the bailout. I'm not 100% sure my family can survive if Uncle does not step in. But more than anything I'm sick of government handouts. This is another government handout.
p.s. Did anyone catch where Russia has a group of warships in the Carribean?
I think Alabama and members of the Alabamian diaspora can all be proud of the leadership of Sen Shelby (as ranking Republican on the Senate Banking Committee) for standing up to Ben and Hankies latest flavor of ice cream. He was interviewed by NPR this morning [Click Here].
ReplyDeleteThere are two forks in the road of thought about our current situation. The first is a) we are already in the midsts of a recession vs. the more hopeful b) govenrment intervention will prevent recession or further recession. I tend to lean on 'a'. Given 'a' (my assumption), the next fork is c) will government intervention help or d) will it prolong and worsen the situation. Here, from my unreal-world perspective, I think that 'd' will be the case, and alot of the flack the Ben and Hankie show got from the Senate yesterday and will get again from the House today reflects that fear. Nevermind the Democrats, they just want to hand out our money to anybody and everybody.
Another thing to consider is the effect of this $700b on inflation. The government doesn't have $700b so they will have to create it -- poof!. And oil being a dollar denominated commodity, expect very bad things on the price of oil, all supply / demand issues remaining equal.
I never put the proper info in my link. Lets try again. http://www.npr.org/templates/story/story.php?storyId=94973418
ReplyDeleteFor a more rosy picture...[Click here]. Lets all hope he's wrong. I am affraid he is right, but perhaps a little extreme. Thats what my gut tells me...and who would doubt their gut?
ReplyDeletePoint of note...by definition we are not in a recession. For that matter, since 1982 the country has been in a true recession for only 16 months within that 26 year period.
ReplyDeleteThanks, JCB. I saw that one comming before I ever hit the post button. But I think I would be a little off to pull a McCain and say the fundamentals were sound too. What is the technical definition? Three consecutive quarters of negative GDP growth? By that definition you could be in the begining of one and not know it until almost a year later. Maybe more depending upon the lag time from the end of the quarter to the release of the actual report.
ReplyDelete