Friday, September 26, 2008

Bailout Needed? YES

There is a rumor going around the internet that we should take the $700 Billion and invest in the people giving them all a check. Leave Wall Street to hang and companies to die. The thinking if that giving money to the people will make them start paying their bills. This is laughable.
Giving it to the people will do absolutely nothing. If you divide the money by every American, it comes to about $2300, how does this help someone who is 3 months behind in an $1100 mortgage payment they can't afford anyway? It won't stimulate the economy and yes it is our money that we are borrowing. I have no idea where an earlier poster came up with the $400 K scenario. What this does is to support the collapse of a banking system that for good or bad holds up the rest of the economy. With out loans, small business doesn't thrive, big business can't function, and people can't operate in a world that many live month to month. Yes stupid loans were given out when money was plentiful and there was insurance on risky loans. But the holders of that insurance didn't put away enough money to cover them, banks didn't want to continuously foreclose and there is a housing glut in many parts of the country so the structures themselves are not worth what is owed on them. This bailout will create a whole new way of our economics working. At least I hope in the end it does. The government should take over failing companies, hold the boards and management responsible for negligence and seize all assets to avoid anyone walking out with any severance. Investigations should be done on any illegality and it should all be done in the light of day. The gov't should have a plan for reselling assets at fair value as quickly as possible and using that money pay off the price tag. When the economy is strong again, and it will be, there should be significant tax reductions across the board. As for programs to help people buy a home, in the future there should be far more oversight in how those loans are processed and how much money is given away. The government should have strict controls to avoid predatory lending and frankly ridiculous lending. I don't see this package as simply throwing money at the problem. Giving every American $2300 would in fact put money in people's pockets but will they pay their past due loans or buy a flat screen? I don't know. What I do know is that if we do nothing we risk a total collapse of monetary systems around the world and frankly I don't want to learn Chinese.

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