Keane observations about life, politics and sports.

Sunday, September 28, 2008

Financial market bailout

I've hesitated to blog on the bailout. I did not want to rush to judgment and I wanted to see what the deal really was before declaring my support or opposition. Believing in free market capitalism, my default position is to oppose bailouts or any excessive government involvement in private enterprise. However, I also understand how interconnected the financial markets are and how failure of a couple banks could lead to a lack of confidence in the entire industry. Additionally, I realized how the entire economy depends on available credit. A financial market meltdown could potentially lead to a near total shutdown of our economy. The bigger concern regarded precedent setting government involvement, I also was worried about how the removal of pain from taking excessive risk would lead to even more egregious management decisions in the future.

How did we get to this mess? While the problem may scream for action it also demands an examination of the actions that brought us to this point and hopefully accountability for those responsible. Congressional leaders seeking to avoid responsibility have claimed excessive greed is to blame. Okay? Problem is that is a BS answer. Greed alone does nothing without someone willing to act upon that emotion. Greed only succeeds if an institution or industry fail to ensure the system can't be gamed. Who enabled greed to win. Or rather, who changed the game. Who cheated? Who benefited from cheating? I can't answer all those questions, but if the federal government believes it is important enough to solve this problem then they should put equal effort into identifying the guilty parties and exacting a pound of flesh.

For those interested in how we got to this point, these videos are very enlightening.

REDSTATE

Burning down the house.

After reading dozens of articles and watching the above videos, I'm convinced of a few things. First this problem was caused (or at least exacerbated) by a movement over the past couple decades to treat home ownership and credit as a civil right. Secondly, we had individuals in charge of GSE's Fannie Mae and Freddie Mac who gamed the system to get massive bonuses while hiding the impending crisis. We had congresscritters fighting against regulation of Fannie Mae in order to protect friends in executive positions at that organization (Obama advisor Franklin Raines and Clinton Justice Department political hack Jamie Gorelick). From the business side of things the biggest contributing factor was a lack of fear of the potential risk. We can not ignore the actions of John and Jane Doe. Many regular folks entered into mortgage agreements without the means to pay for their loan. In my book, if you buy something and don't pay for it you're a thief. A two-bit thief steals cigarettes from the corner grocery. A big time thief with lots of accomplices go big time and steal homes worth hundreds of thousands of dollars. You get thousands of big time thieves and all of a sudden you need 700 billion dollars available to Treasury to avoid a massive economic collapse.

Bottom line: The risk to our economy is sufficiently grave that I reluctantly support a deal. However, my support is based on a couple caveats. None of the money in this deal goes to anything but the intended problem - NO stink'n earmarks. An early version of the deal scuttled by House Republicans included money to a Democrat voter fraud organization called ACORN. My second condition is accountability. Crooks like Franklin Raines should pay back fraudulently obtained bonus money and face prison time.

Many people wrote or called their congressman to express their opposition to any deal. I'd urge those people to follow up with a call saying if they truly believe a deal is necessary then make sure it includes NO earmarks, ensures accountability, and ensure no repeat of the situation.

1 Comments:

Blogger Ben said...

Looks like it failed. Wonder what is next.

September 29, 2008 at 11:16 AM

 

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