Mark Terry

Monday, September 29, 2008

Holy Crap! Did the HOR really do that?

September 29, 2008
Did I hear the news right? Did the House of Representatives actually turn down this bailout package? This you've-gotta-do-this-or-the-end-of-the-world-as-we-know-it-is-gonna-happen-next-week bill?

You tell me:

1. They're hugely irresponsible because EVERYONE knows that something must be done immediately or the economy will grind to a total halt and we'll all be forced to go back to a barter-for-goods economic system any day now.

2. They're responsible because the plan sucks, it's ridiculously expensive, nobody knows whether it will work or not, and the American people are getting seriously pissed off about it, so they're stand up their constituency (or as they like to say, Main Street, not Wall Street, a phrase that's starting to nauseate me in its sycophancy. Sure, Senator, divest yourself of your stock portfolio, then we'll talk).

3. We're politicians, for God sakes, this is what we're best at! We stick our heads in the sand and hope someone else will take responsibility for solving a problem that's going to be a boondoggle even if it works!

What's your vote? Or am I missing an option?

Mark Terry


Anonymous Eric Mayer said...

My take is that this end-of-the world if we don't shell out $700 billion is being brought to us by the same gang that told us Saddam was gonna be raining nukes and other wmds down us unless...It's a last ditch effort to destroy social programs in this country (recall the shrub's scheme to kill social security failed) by bankrupting the government, with the bonus that it transfers the treasury to the gang's buddies.

2:13 PM  
Blogger Mark Terry said...

My alternate economic bailout plan (and by the way, my wife handles the money in the household and with good reason) is:

Instead of giving $700 billion to the Treasury Dept. to buy up banks, let's just use the money to offer low-interest, fixed-rate loans (say, oh, 4%, 15-year) to EVERYBODY in the U.S. whose mortgage is being foreclosed on.

2:21 PM  
Blogger Zoe Winters said...

hmmm, I know this might sound "off" but I truly believe that a lot of this is being over-hyped due to the election. You have to take every "crisis" with a grain of salt 2 months before a presidential election.

I don't believe the sky is falling or the world is ending. I could be wrong, but to me this is very close to the Y2K freakout. If people remain calm, and don't start pulling money out of their banks, this won't effect the economy that much. But that's my opinion.

2:29 PM  
Blogger Mark Terry said...

I actually agree with you. I think a big chunk of this is panic. And frankly, I'm a fairly smart, well-educated guy and I don't really understand all this. I've got the gist of it, but I don't completely understand it. And it doesn't really sound to me like all the PhD economists do, either. So my guess is the average schmo on the street is panicking based on not having a clue what's going on. I also think: hell, two, three weeks ago we were muddling along until Paulson opened his big fat mouth. What's the deal?

2:40 PM  
Blogger Stephen Parrish said...

We're still manufacturing.

We're still hiring.

We're even still lending money. Where's Chicken Little?

I'm glad (surprised, but glad) the House voted the bill down. Since when does the government bail out poor performers? If I open a flower shop and it fails, is the government going to prop me back up?

You say give 4% fixed rated loans to people who were foreclosed, typically people who exercised poor judgement by taking out a variable rate mortgage when interest rates were low. What about me? I invested sensibly. Do I have to act stupid to get a deal? The dumber we act, the more money we get? How about I just throw my money on the street; will the government reimburse me?

2:42 PM  
Anonymous Jude said...

I think this NPR piece explains it pretty well.

4:35 PM  
Blogger Stephen Parrish said...

This comment has been removed by the author.

5:14 PM  
Blogger spyscribbler said...

Well, I think it's real, but I wouldn't put it past the media to overhype. A friend's company is laying off 300 employees by the end of the year, just because of this last week. Another has a frozen money market account, which is earmarked for her sons' college. (One is in college, so it's an issue.)

It also was at 92 cents on the dollar, last I heard.

I did a review of the Great Depression, and it's true what they say: we're on the same path. It's eerie. It's started with bad credit, people unable to pay, banks going under, then the stock market... it's the same path. Scary.

5:17 PM  
Blogger Mark Terry said...

Oh, I know. I pay my bills, have a seemingly excellent credit rating, and when the opportunity came up, refinanced at about 5.4% and got in on a deal to make payments every 2 weeks instead of once a month that cuts back on the interest by a significant amount.

And I have some relatives who invested in a house with a 40-year (yeah, I can't get over that, frankly) ARM who probably never should have been approved for anything. There was a while there when if you had a pulse you could get a loan and meanwhile, I'm apparently being expected to take the 28%+ taxes I pay quarterly to help the banks out.

Yet, our leadership is moronic.

You want an eye-opener? Go read what this statement was ACTUALLY spoken in regards:

"We have nothing to fear but fear itself."

5:51 PM  
Blogger Jude Hardin said...

Mark and Stephen:

At this point, it's irrelevant who invested sensibly and who was stupid. It's irrelevant who was greedy and even borderline criminal. If the "consumer paper" markets continue to freeze up, and if mutual funds continue to "break the buck," we're all going to be in the economic shit hole.

"Bailout" was an unfortunate misnomer. It's really about keeping money flowing among lenders and borrowers.

6:32 PM  
Blogger Zoe Winters said...

I hope the people involved go to prison for a long time. No matter what the outcome.

9:38 PM  
Blogger Stephen Parrish said...

Taking money out of the taxpayer's pocket to rescue failing lending institutions so that money will eventually flow into the taxpayer's pocket makes no sense to me. Government has no business in these affairs. If we really are on the brink of a depression, the bill that just failed to pass wouldn't have stopped it.

11:22 PM  
Blogger Erica Orloff said...

I'm with Jude on this. I wasn't for the bill for certain reasons such as no foreclosure help, but I am for helping those close to losing their homes for the reason Jude cites. It's either HELP the people who made poor (more on that in a second) decisions--or feed them later on bread lines. Take your pick.

BECAUSE they made those deals with the devil. Here's the thing . . . they REALLY made a deal with the devil. This country has ALWAYS said--from the top down . . . OWN your home. It's the safest investment. If you don't you are throwing money away and so on and on. The person of average intelligence, or below-average or what have you, heard this as a mantra in this country since the 1950s. Homebuilding was a foundation of this nation's economy and the power brokers were only too happy to let everyone believe that mantra. But the NUANCED version of that is some people shouldn't own. Or some people live in markets with inflated property values. Or . . . or . . . there's always some nuance there.

So now the masters of greed say, "It's SO important for you to own, that really, if we have to fudge your mortgage application a little bit, or I have to offer you an ARM, it's totally OK because really, if you don't do this, you might as well burn your money in the fireplace." Once again, these devils KNEW they were offering a bad deal. They KNEW--as the money people--that this was very risky, but they misled people who had no or little concept that the mantra was nothing more than dogma. A religion of the masses. I see Karl Marx turning over in his grave.

MOST people who got in this mess finanically aren't reckless. They are ordinary people of faith who believed their government's mantra. The news reports every night are FILLED with stories of immigrants and people who speak little English, of retirees, and all sorts of folks, of teachers and retail workers, of blue collar workers, of families of every stripe, who believed what highly educated and greedy people and an ENTRIE government and system has been telling them since they were BORN. What their own PARENTS had been told since THEY were born. And now these are the ones suffering.

Stephen, the government CREATED this mess. And no, I don't believe if we go and burn money in the street we should be rewarded. But not everyone is as smart as you are. Not everyone sees the government is corrupt. And now we have a MORAL obligation to help people who have been decimated by what was a PLANNED, OBVIOUS, and masterminded economic system that was a house of cards perpetuated by the government.


3:08 AM  
Blogger Mark Terry said...

For all my ambivalence, I do think the government has to do a bailout. And, on the positive side, it's possible that we as taxpayers will, in 20 years or so, when some of these properties improve, benefit--maybe there'll actually be money in Social Security as a result!

I think it's best not to get too tangled up in the blame game on this, that's coming. Right now we need to focus on a solution, even as ugly a one as is being proposed.

The link Jude gave was excellent, and if you get a chance, go to and look for the animated short-film on it, which was excellent as well.

Here's a possible scenario to remind you why something needs to be done:

How much balance do you have on your credit card? Let's say, just for a number, you have $4000 on your credit card. Further, what you can run up on your credit card is $10,000. But your credit card company, frightened by the bailout and by the fact they can't get loans themselves, now turn to you and say, "We're very sorry, but we have dropped your credit limit to $4000. You cannot use your credit card until you get your payments below $4000."

Some credit card companies are already dropping credit limits, and although I'm not an advocate of living your daily life on credit cards, just imagine the repercussions of this to most people and the ripple effects. Not only are you screwed if you need to, say, buy gas with your credit card, but you're spending less so the economy starts to get sluggish because...

Nobody's spending.

4:43 AM  
Blogger kitty said...

Follow the money.


5:00 AM  
Blogger Aimless Writer said...

Someone should smack them all up side the head, send them back into that room and not let them out until they get the job done.

You know, a simple solution would be for the government to just pay off all our mortgages and credit cards.
Spending would go up, the economy would go up and gas wouldn't seem so horrific.

5:47 AM  
Blogger Zoe Winters said...

I'm always ambivalent about the economy anyway, because on a big level it depends on spending, but spending more than what you have is bad for individuals, and later bad for the economy. It runs in cycles, but it seems the cycles are bigger and more dramatic the more irresponsibly people spend in the "up" cycle.

I have 1 pre-paid credit card. Why do I have it if it isn't "real" credit? because if I don't absolutely trust a business I'm doing business with from a credit security standpoint, I transfer funds into my pre-paid card to use. I don't use credit. For anything.

When I was younger I got into a lot of financial trouble because I wasn't taught the value of NOT buying stuff just to have it. Yes, there are cases where people need money for an emergency. To eat, to keep your electricity on, to go to the doctor, etc. BUT the vast majority of Americans with credit cards don't use them this way.

They buy furniture, clothes they don't need, newer cars on credit, homes larger and nicer than they NEED or can afford, etc. People have no concept of the division between wants and needs and they enslave themselves for that.

Because when you're living hand to mouth based on debt incurred for shit you didn't even need in the first place, that's a basic self control problem. And it lowers quality of life. You can't eat your Wii.

As for buying vs. renting, I agree with what Erica's saying. While it IS true that a home CAN be an investment that will build in value, this isn't true in every case. Buying isn't empirically better than renting.

And owning a home is misleading, since you are basically paying the government rent in the form of property taxes. And they CAN foreclose on your home if you don't pay it. So it's not really "yours" in the fully understood sense of ownership. It's always in some sense the government's.

Also, what if you are throwing your money away renting? You cannot take it with you. What good does it do you after you are dead?

Most people don't own their home completely free and clear without a mortgage payment. Many of those who do, for some assinine reason feel the need to "upgrade" so whether you're paying a mortgage your entire life or rent, what difference does it really make in the grand scheme?

Yes, if you own a house you can sell it, but it's not like its the only possible thing you can invest in. Also, most people get attached to their homes, so saying it's an investment and you can sell your home to some people is like saying you can sell your children.

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