Sunday, November 16, 2008

Bailout

I'm totally hanging myself out here on this one because I don't feel like I have a firm grasp of the issue. Back in October when I first read about the bailout my first reaction was: WTF? Basically this is what I understand: motivated by greed and loose government standards, banks started providing funding to people who didn't deserve it in the form of mortgages and other loans. When people couldn't pay, banks started drowning. This is pretty much where things get fuzzy for me.

Backstory: When Jeff and I purchased our home four years ago
the builder's mortgage company nearly refused to give us the 30-year fixed we
requested, telling us we would be better off with an ARM because a) we wouldn't
be in the house for long, b) we could use the money we could save, c) we had
great credit and could get a better rate. I had to say no countless times
before they reluctantly (I'm not kidding, sighs and all) to do the 30-year
fixed. Could you imagine the crap hole we would be in if we didn't?


From the beginning I was against the bailout because I felt if companies made crap decisions and people fell for it then they should sink. A wash of sorts. I haven't changed my mind despite being told that if they hadn't given them the money the economy would be twice as bad today, etc.

Now, the car companies are starting to beg for money. I can't remember where, probably CNN, I read a commentary piece about if we bailout the banks, the automakers would be next, followed by the credit card companies and so forth. I wish I could find this article! While I see the social benefits of this bailout more clearly, I'm still not for it. Hybrid and other gas alternative vehicles have been available outside of the US for years, but American companies are dragging their feet on this (mainly because they are bedfellows with oil companies). There is a reason why Toyota and Honda have battled for number one: because they provide the options people are looking for. Furthermore, the idea of quality has been lacking in American made vehicles.

Is there something I am missing, guys? Please fill in the blanks for me...

5 comments:

Shelly said...

Totally agree! The thing is that American auto makers have been getting funding for "alternative fuel vehicles" for 30 years!! They are getting just boat-loads of money from the government....but they are not producing anything. What motivation do they have when they are not only getting all these grants from the government....when there inability to sell their gas-guzzlers makes them start to fail.....that same government will bail them out??

I was talking to a friend the other day and came up with a good analogy. The auto industry is like a 5-year old kid. You tell the kid to clean his room. To motivate him, you tell him that you will give him some candy. Then you say, as soon as the room is clean, he won't be getting candy anymore.

Well.....all you are gonna have is a fat kid who is standing in the middle of a semi-messy room. He will clean just enough to show you he is doing something....but he is never going to finish the job because that will cut off his rewards.

EmperorDarTea said...

Ummm....you read about the auto companies on my blog...July 21, 2008. WAAAYYYY before all this shit came down.

http://web.me.com/emperordartea/westover/tea_leaves/Entries/2008/7/21_what’s_new_in_the_L.O..html

In my humble opinion I don't think you are missing too much here. I am certainly not Mr. Knowledge on all of this but I do think the original $750B bailout was necessary. IMHO it is not really about forking over cash as much as it is about restoring confidence. In fact, most of the cash has yet to be allocated which might be part of the problem. We forced some banks to participate in the bailout which was a mistake. By forcing them in we limit the demands we can make on those that would have crashed and burned.

If anyone cares I think that several things will certainly happen. A.) Obama will take office and re-do whatever Bush tried to do. He should get there with plenty of the original money left in place. No idea how he will spend the coin but he will probably do something to keep people from losing their homes. B.) A second (I think) $1.5T dollar bill will be implemented that is meant to get the middle class back upright. This will happen before April 15th and might even be a part of the tax year. C.) The auto companies will get their help. I long ago advocated something really simple. Give them each $25 - $50B to retool and come up with new fuel efficient cars that cost less than $25,000 and get more than 35 mpg. If they get 'er done by 2011 they can keep the money as a gift. If they do not they have to repay the money at 8% interest. During that time period no stock can be bought or sold. It's currently worthless anyway. D.) Let the credit card companies fail. Who cares. They are all just houses of paper and will quickly be replaced by a new pool of money. E.) Fannie and Freddie will become the same company...they do the same thing anyway. They will also be largely nationalized and increased in size to actually provide the surety we need. F.) IDIOTS will continue to support politicians that do not serve their common good. See Kansas, Idaho, and every other red state. The notion that this country is center right is a joke. If that is the case it is only because the sheep refuse to educate themselves on their beliefs vs. the political parties. If they knew their views were represented center-left the GOP would be in permafrost. I know this point is not economy related but you encouraged me to jag on the GOP. G.) Airlines will surely follow the automakers. They are a mess and MUCH of that has to do with the government. Want to know who should be pissed? How about all of the United workers who saw a federal judge effectively strip them of all their pension money so they could continue to mismanage themselves.

I don't think we can, or should, count on the government for everything we need. I do think that it is ONLY the government that has the cash required to undo the years of neglected governance , especially those years under Bush. If it was me I'd auction off his ranch and cancel his pension and secret service protection and apply it to the debt. The I'd sentence him to go live for a year with Mrs. Sheehan.

Have a nice day.

EmperorDarTea said...

From my blog on July 21, 2008

Sounds like there are a lot of changes coming with autos -- one has to wonder why they are all coming out of Japan. The only question seems to be “just when will the US automakers be looking for a bailout?” I guess the order will be banks/mortgage companies, then airlines (again), then auto makers.

witticism here said...

That's where I read it!! I knew it came from an intelligent and handsome source!

:)

EmperorDarTea said...

Thank you for the handsome comment. It eliminated the need for me to hack into your blog and add it myself.