What a day.
The Yahoo headline reads House ignores Bush, rejects $700B bailout bill.
Bloomberg reports Fed Pumps Further $630 Billion Into Financial System.
Combining those two headlines reads to me: "Treasury ignores Congress, Americans pay $630 billion rather than $700 billion."
Now I understand that the $630 billion in loans is money that the Treasury expects to receive back in time, but it will create an inflationary impact by releasing that much new currency into the economy. The American taxpayer will pay anyway; this time through our dollar having less buying power. And what happens if the banks cannot repay the loans that they are taking out? Are we checking to make sure that they are not taking out more money than they can repay?
I was talking to a VP of a bank chain here in the Midwest who was shopping at our store the other day. He shared that their bank has no exposure to the dangerous loans that became the trend of Wall Street banks and are taking them down. My thought is that we should let the banks who made bad decisions collapse because there are still wise banks out there who did not join in the shenanigans. If we need to bailout the economy, then create new banks that are unconnected with the corrupt banks. The only banks that are in trouble are the banks who gambled too much on the economy to always prosper.
Newt Gingrich addressed the problem that bailing out failing companies would create in a capitalistic system. He points this out as Danger One and Danger Two to the Paulson Plan. Danger One is "Crony Capitalism." This is using the government to help the rich investors who have the money to effectively lobby Congress to bail them out when their business fails. We would have capitalism on the front-end but socialism on the back. Danger Two is "Bureaucratic Capitalism." This is a result of us not trusting the system any longer because the system broke. In this situation, the government would tell capitalism what to do because capitalism is not regulating itself.
The irony is that capitalism wants to work here. These companies made bad decisions and capitalism is ready to crush them. We like to fight against nature. We build cities next to the ocean below sea level and hope that the levies do not break. Let us stop fighting against nature and allow capitalism run its course.
I remember when we were looking at houses in Lansing during the first part of this century. The mortgage broker kept trying to push us into adjustable rate mortgage that we would not be able to afford. He said that we would be making more when our payments would go up. He tried to use our optimism about the future to handcuff us to a mortgage we could not afford. We did not buy a house at that time. Now for the people who did not have the wisdom to say, "No, thank you," something should be done. But to bailout the banks and the executives who knew full well what they were risking, let us not waste our money on them. If banks need to be rescued for the economy to keep chugging along, then establish new banks with more responsible leadership. But please, stop allowing a treasury secretary who was in charge of one of the banks that is being rescued from designing the plan. His interest appears to be the banks rather than the American people.
I am not anti-socialist programs, but I am anti-socialism for the rich which this reeks of. Socialism, if necessary, should be used to help the poor, not the rich. I can't wait for a new President.
edited to add: Michael Moore and Newt Gingrich agree. Both political sides seem to be against this. It might be harsh to say, but it appears that only the politicians without convictions are in support of the bailout.
