- May 24, 2005
- Madison, WI
- VW GTI 4-Door (MKVI)
I find it quite hilarious about how everyone wants to blame "Bush mishandling the economy." It's like they think there's a computer terminal in the Oval Office and you have to enter a code every 108 minutes or the economy implodes. It's the Fed and some way pre-Bush policies to blame. "Government bailout" needs to be an alien term, else we're just giving muffins out to greedy moose.
I have nothing against a bank failure - one will be enough for the rest to get their acts together.
Which explains why when IndyMac failed, Lehmann Brothers and AIG got their shit immediately straightened out. Oh wait...they didn't.
The current market situation is largely due to post-9/11 deregulation of the financial sector. To jumpstart the economy again, the republicans, who were in power, deregulated subsectors of the financial sector. This allowed the sale of mortgage backed securities to rise again, for the first time since the recession of the 70s. These products have upsides and downsides; while they help make loans readily available because of the easy profits available for investors when the market is good, they also have a downside. When the market starts to take a turn for the worse, the lowest rated securities go bad because people tend to default, which means the securities go bad and nobody wants to buy them. This puts the smaller banks in deep shit, because they often use these securities to fund the loans. They buy some of their loans from larger banks like Citibank, Barclays, etc. The defaulting of the small banks hurts the larger banks because they don't get their debts paid and they are unable to sell loans, which are huge sources of their profits. So the deregulation of the financial sector basically can (and has) screwed over the whole system. What this bailout says about Paulsen and Bernake is that they're realizing that unimpeded free markets are not working right now. I'm largely a free markets sort of guy, but this is ridiculous. We need to regulate this stuff.