Friday, September 26, 2008

For What it's Worth - Sink or Bail

I've been falling a bit behind. I've got a few posts in various points of completion. I've had another follow up with my cardiologist that I need to report on and a few "meaning of life" type thoughts that are not quite ready for public viewing. I've been like many others over the past few days. I've been watching and have become intrigued by this whole frantic call for an economic bail out of the US economy. Yes I've watched way too much TV. I'd much rather be diving or doing any number of other things but this little Open-heart surgery thing is my excuse and I'm sticking to it for now.
Anyway, I thought it might be interesting to see what kind of response I get on this blog if I posted a short little email I wrote to both the Obama and McCain campaigns today. I don't know why I did. I just sat down to type some emails and this kind of spewed out so I sent it.

Dear Senators Obama & McCain (and President Bush)

CEO's that have left Wall Street in the last 5-8 years should be made to repay a portion of their windfalls if they were involved in the companies getting bailed out now.

The markets, including housing, should be left to adjust even if it's a big bad dark black diamond run. There are always two sides. Many people have held off buying a house while waiting for the markets to come down and saving up to do so. Now that the inflated market is on a down turn they're ready to do what investors say to do. Buy when the market is down. Many have done the responsible thing and not lived beyond their means thus leaving themselves in a position to diversify (ie own a home) when the time is right. The bail out penalizes many people twice. It does not let the market correct itself and our tax dollars are used to fix the mess created by the greedy and those who could not afford to over extend themselves but did anyway.

How long can America keep living on credit? How long can America live with a 10 trillion dollar debt? It's time to face reality. Why put it off for our kids and grandkids to deal with? What about the prudent financial institutions that did not over extend themselves? Should they not be able to benefit from the down turn and stupidity of their competitors. Many financial institutions are still running expensive advertising campaigns including national ads on CNN. If the entire financial system is hurting so bad how can this be?

I agree some sectors of the population may need extra help. There are plenty of people out there who have done the right thing and acted responsibly despite the ease of borrowing money. The elderly who have been getting ready to transfer mutual funds or 401K's over to liquid assets to be used in their remaining years should get some form of assistance so they don't loose everything they've saved for. People who loose their job should be given assistance to bridge the gap and buy some time as they find another job so they don't loose a house or business that they otherwise could afford. Or perhaps people affected should be given assistance while they gain training and education related to developing renewable energy sources or if they transfer into community service positions that benefit others hit by natural disaster for example. Seven hundred billion dollars could go a long way in this regard and help th people who are really in need.

This economic crisis and the urgent jump to "do something or else" are quite reminiscent of the days following 911. We must learn from 911. In this case we must ensure facts and opinions from many different economic experts all around the country are taken into account, not just the guys currently in charge. This is especially true when these same people are the ones who should've seen the whole thing coming in the first place.

It is also difficult to comprehend how taking the time to get any bail out package right the first time would do anything other than cause an initial slow down and adjustment in the economy to occur sooner rather than later. A slow down or resession is something that looks inevitable anyway and there is no guarantee that any amount of money thrown at the financial institutions will keep the economy from grinding to a halt now or in the months and years to come. Throwing more money at it does not deal with the core of the problem - DEBT. With a 20 trillion dollar deficit it will be harder and harder in the years ahead for my kids and yours to borrow money, buy a house, own a car or even eat.

Should America really be built on credit? Or should people, businesses and institutions that have risked a shaky foundation be asked to deal with the consequences as their bubble bursts?

Oh and by the way, for what it's worth canceling the debate on Friday would be a very bad mistake!


Lil' Hammerhead said...

I agree wholeheartedly Mike. A system has taken place over the last fifteen years of absolute necessity on consumerism and easy credit. We use a cellphone for three months, and throw out a perfectly good and almost new phone for the newest thing. We have a nation going into incredible debt.. just to keep up with the "newest". It's silly and wrong. We've lost all sense of moderation and thoughtfulness. Why save for something when the bank will loan you the dough?

There must be a correction. Nothing wrong with wanting the newest thing.. save up for it. Nothing wrong with wanting a house.. save up for it (or at least a good downpayment).

Bailing this system out.. won't correct the behavior of the banking and credit industry, and won't correct the behavior of consumers. It's time to bring some frugality, thrift and savings back into the picture.

Neil said...

I absolutely believe it's time to sink or swim.

The market needs an enormous correction, not a bail out. And it's time for a $250,000 house to be worth just that and nothing more.

(Yeah, take that all Wall Street bail-outers out there.)


scubatripp said...

Seems like the last few days there have been a number of banks (institutions) happy to buy up others at a pretty good price.

It also seems like a good one follows each bad day on the market. That means someone is making some money and I doubt it's the main street folk wondering if they will have a job after the big shake up.

Rather than a wall street bail and pump all this capital into the banks bad debt why don't they get ready to give assistance to those who will need it.

It didn't take long after 911 to fan out hundreds of thousands of TSA folks supposedly improving our security. For 700 billion dollars couldn't they take some of those who loose their jobs and train them to objectively give out assistance to those who need it and can prove it.

Those that loose their job because the banks lay them off for example.

The elderly who were planning on using investment savings to live on in the next 5 years.

Or those who get laid off and can no longer afford health care.

Perhaps a subsidy for small businesses that show they are on the edge now and any loss of business is going to cause them to lay people off or not provide health benefits. The government could absorb the blows and ease the pain of this "correction" at the source of the pain.

A human element is a must. I don't think those who just bought the new living room entertainment system with the "no payments until 2009" option should get bailed out in anyway. Especially if they went into their home purchase over extending or not considering a worst-case scenario including job loss. Some decisions just can't be rewarded on Wall Street or Main Street.

For those who cry socialism, 700 billion dollars from the government whether filtering through the banks or given directly to citizens in distress is the same anyway you slice it.

Of course I'd trust the money in my own hands, or to those who need it, rather than in the banks and the very people who got us into this.

It's not going to be easy but anyone who thinks the next 5 years are going to anything but hard for a lot of people are probably the same ones making the markets work for them during this time of uncertatinty. The rich get richer......