Yesterday, Cindy wrote about the $700 billion bailout package proposed by the House. The assumption at the time was that it would pass. News of the House rejection of the Plan yesterday stunned Wall Street and world markets. Some people cheered the rejection, as the plan has the reputation of charity to fat cats who screwed up – giving executives of failed banks “golden parachutes”. In my view, rejecting this plan is nothing less than disastrous. Economic failure will cost the US much more than the $700 billion package.
The dam is breaking. We just can’t wait and argue over politics. The time to act is NOW. More European banks failed this morning on the news that the US did not pass the bailout package (they were had to be bailed out by their respective governments). I don’t like “bailing” people out, either, but we need to do something or almost every bank in America will fail. We need to get over the perception that this is all just fun and games for the rich folks on Wall Street. If we don’t do something, our economic system will collapse and take the world down with us.
Go back to the 1929 stock market crash and see why the world (not just the US) collapsed. We had no FDIC (Federal Deposit Insurance Corporation). We had no bail out package. Without dollars to move, businesses and farms collapsed and we had 25% unemployment. The dust bowl in the midwest only exacerbated an already bad situation. (The dust bowl was caused by poor farming techniques.) The economy ground to a halt. It took new programs created and instituted by President Franklin Roosevelt to get the populace employed. Yet ultimately it took WWII for the final Bush to get us out of the economic slump.
When Jimmy Carter was president (ahhhh, remember the last gas crisis?), there was double digit inflation, double digit unemployment and 17% mortgage interest rates. These increases in rates set the stage for the horrific interest rates we see on Credit Cards today (for default rates and subprime cards). Bad as it was, we did survive. There were bank failures, but FDIC protected the vast majority. One thing better during this time was that most folks still had corporate sponsored retirement packages so no one lost money in pensions or the newly created (1978) 401Ks.
In summary, failure to pass the Bail Out Plan means:
- High unemployment
- If enough banks fail, at some point depositors will lose their savings (The FDIC insurance does not have enough in its account to back up everyone’s savings.)
- High inflation
- High interest rates
- Loss of Global confidence in the US Economic health. If other countries will not buy our Treasury Bills, in order to support our deficit we will need to raise taxes. A lot.
- Basically DISASTER
Want to see who voted for and against the plan? Here is the breakout. We welcome your comments on this crisis, whether you agree with us or not.
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It’s not a $700 million bailout, it’s a $700 BILLION bailout, an unconscionable amount of the nation’s resources to hand over to a bunch of investment bankers as a reward for poor decision making.
The same people telling us how necessary this is now were lecturing us about “personal responsibility” when they were rewriting the bankruptcy laws. Where is that sense of “responsibility” now?
who is going to bail me out. I had to file chapter 13 just to keep my home. this is not right. Bankers can reap all the benefits andmess up the economy and then get a bailout. there is something terribly wrong with this.
You can not blame Wall Street alone.
People taking loans that they can’t afford without any plans for rainy days.
Fannie Mae and Freddie Mac is resonsible for allowing loans to be given to people who were a high risk. Then they took these risky mortgages and bundle them up in Mortgage-Backed-Securities and sold them off without having to explain the risks involved to the buyer.
The SEC deregulated to the point that they let this kind of thing going on without interference.
With oil and grain skyrocketing, no wonder people are straining to make their payments.