Bailouts for Dummies

Discussion in 'Current Events' started by Lue C Fur, Apr 30, 2010.

  1. Lue C Fur

    Lue C Fur Evil member

    Bailouts for Dummies

    By Rick Manning

    The Dodd – Goldman Sachs financial services takeover bill can be intimidating to understand for many people, including myself. However, when all the smoke clears it really comes down to four basic points:

    1. Congress would set up a permanent bailout fund that is financed through increased charges to banks, which will be paid for by financial institution customers and savers. This permanent bailout fund would allow Congressmen and Senators to avoid voting on whether to bailout a specific company like Chrysler, GM, Citigroup or Goldman Sachs, instead shuffling the decision off to unelected political appointees.

    Not surprisingly, Goldman Sachs and Citigroup have both announced that they support the Dodd financial takeover bill since it institutionalizes the very too big to fail philosophy that led to the TARP bailouts in the first place.

    2. Political appointees and unelected bureaucrats can also declare any company to be a financial institution. This means these political bureaucrats can decide that any company needs to be taken over by the government using the bailout fund. This extreme power gives these unelected authorities the ultimate coercive power over business and America's economy.

    The government takeovers of GM and Chrysler under TARP are a good example of the Obama Administration's trial run for this power.

    You might remember that Obama took care of his labor cronies through a political deal that benefitted the United Auto Workers union at the expense of those private individuals and banks who lent GM and Chrysler money through loans and bonds purchased. Ownership of both auto companies was redistributed to the politically powerful union leaving no doubt about how the bailout-takeover authority will be yielded.

    3. When the government decides to take over a company, that company is not allowed to fight it in court. So, if you own shares of a company, and the government takes control of that company, you as an owner of the company cannot challenge the decision to take your property in a court of law. Sounds more like a third world dictatorship than America - doesn't it?

    4. Finally, the Dodd-Goldman Sachs bill doesn't actually deal with any of the root causes of the collapse of the home mortgage market. For example, government policies forced government sponsored mortgage giants Fannie Mae and Freddie Mac to underwrite mortgages to people who were less likely to pay them back. Congress then built the house of cards even higher by ordering private banks to make similar if not even more risky loans if they wanted to expand across state lines, or merge with other banks to stay competitive.

    Not surprising to anyone even remotely paying attention, many of the people who didn't actually qualify for loans, eventually couldn't repay them, and the house of cards which made up the entire home mortgage industry collapsed.

    Now, the same Congressional scoundrels largely responsible for forcing the financial services industry into accepting the idiotic idea that if you lend a crack dealer $300k for a home mortgage that you will get paid back, are 'fixing the problem'. Feel better yet?

    In sum, the Dodd-Goldman Sachs bill doesn't fix anything. Instead, it perpetuates the very problem it claims to want to solve — leaving the very root causes in place while insulating the politicians responsible for building the house of cards from the consequences of their political rather than market based decisions. Crazy, isn't it?

    Rick Manning is the Director of Communications for Americans for Limited Government, and the former Public Affairs Chief of Staff for the U.S. Department of Labor.


    SWORDFISH New Member

    I dont think it matters if Obama or someone else in office. Seems the our government is headed in this direction no matter whos in charge. I think its going to take the people to change it. The only thing bigger than the government is the masses.
  3. moreluck

    moreluck golden ticket member

    Just had the news on as background noise.......could've swore I heard that Borat Obama wants to pass something to help bail out the states in trouble ! That's my state too. He doesn't know how to stop spending !!! :sad-little:
  4. Lue C Fur

    Lue C Fur Evil member

  5. ajblakejr

    ajblakejr Age quod agis

    I still owe on my Student Loan.
    When do I get to bail out on it?
    Yet I pay...every month.
  6. moreluck

    moreluck golden ticket member

    My daughter does too !! Maybe if she was illegal, she would get assistance!
  7. moreluck

    moreluck golden ticket member

    There was talk today of Obama coming up with some program to help people to pay their mortgages....maybe like a low interest re-fi.

    What about the people who have been paying their mortgages on time and struggling to do so? What about the people who gave up stuff just to meet their obligations? Are they going to be rewarded with a low interest re-fi? No, it'll be to hell with you people.......and the people who should have never bought a house are going to get molly-coddled. It stinks and it's the typical B.S. of penalizing anyone who does right and rewarding the do nothing slugs.
  8. moreluck

    moreluck golden ticket member

    Here's the site.....
  9. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    I refinance about a year ago. Reduced my mortage from a 30 year to a 15 year and brought the APR from 6.125% to 4.5% fixed. Cost me about $3K which I rolled in to the note.

    I understand and agree with moreluck's frustration but also understand that I would rather keep a home occupied and maintained than to see it sit waiting to be foreclosed upon. I think this program has merit.

    This program would only apply to government backed mortgages. (FHA, VA)
  10. bbsam

    bbsam Moderator Staff Member

    So should we simply let forclosures to occur and let the housing market fall completely apart? All for spite at those we believe bought more house than they could afford? Don't look now, but looks like the president is leading.
  11. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    bbsam, I think that even you would have to concede that moreluck has a point. The majority do the right thing and take care of their business. Falling behind on a payment? Eat at home rather than go out for a month and the payment is made.

    I agree with you that it is much smarter to work with those who are struggling to try to keep them in their homes. Homes in foreclosure seem to invite trouble.
  12. bbsam

    bbsam Moderator Staff Member

    But Upstate, it is bigger than that. It's bigger than we did the right things. Fact is, our leaders, on both sides have us in a situation where a housing market continuing to fall can have absolutely catastrophic effects. Now is not the time to believe the fallacy that "it can't get any worse than it is." So do we stomp our feet in anger like a 12 year old or do we take the necessary steps to right the ship. It is one thing to be angry and another thing to let the anger cause our self destruction. So yes. Moreluck has a point, but it is only half the story and not a half that smart decisions can be made on.
  13. moreluck

    moreluck golden ticket member

    So, you want to rescue (spend more money) people who don't know how to manage their own money????

    But, you all rescued GM too and I was against where do I send my bills so someone else can pay them??
  14. bbsam

    bbsam Moderator Staff Member

    And that's why kitchen table economic geniuses are bad for the economy. Far too myopic.
  15. moreluck

    moreluck golden ticket member

    Oh, and what presidential economic panel do you sit on ????
  16. bbsam

    bbsam Moderator Staff Member

    I'm willing to wait and see. If the republicans nominate bachman, perry or another tea party favorite, money will overwhelmingly flow to thdems because corporations will be terrified that one of those people woul mean what they say and stop at nothing to have their way, even if it meant devault or economic chaos.
  17. trplnkl

    trplnkl 555

    I don't know what the answer is, but one doesn't need to be an economist to see that a severe slow down on the flow of free money has to happen.
  18. moreluck

    moreluck golden ticket member

  19. texan

    texan Well-Known Member

  20. moreluck

    moreluck golden ticket member

    "The Government Accountability Office says in a new report that banks that have repaid the Treasury Department's TARP bailout program did so with funds they received from other federal rescue programs.

    The GAO’s finding undercuts the Treasury’s prior statements that effectively assert the Troubled Asset Relief Program has earned a profit for taxpayers. Specifically, the GAO says that, according to its new review, “as of January 31, 2012, 341 institutions had exited,” TARP, almost half by repaying...with funds from other federal programs.

    GAO: Banks Paying Back TARP with Federal Money | Fox Business