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Thursday, September 25, 2008
The sky is falling! The sky is falling!
Some thoughts on recent events in rapid-fire succession:
Blessings,
Rob
aka The MonT-SteR
Some thoughts on recent events in rapid-fire succession:
- McCain's campaign suspension. Unorthodox, bold, smart. McCain's certainly a risk taker -- even though I've found his politics odious at times, I also find it refreshing that he's willing to think and act outside the overly scripted, focus-grouped, poll-driven box that is modern American politics. Doubtless McCain's camp brooded over the political calculus of temporarily dropping his campaign, but I think it says something meaningful and positive about McCain that he was willing to do it in the first place. Plus, he's once again put Obama on defense; all he could do was react. And I don't think his reaction has been terribly smart so far. If Obama appears at tomorrow's debate alone, he will look like an ostentatious stage hound fiddling while Rome burns. I think it really does have the potential to be the death knell of his campaign.
- The mortgage bailout. I have to admit that I don't fully understand the crisis. But my reaction has been along these lines:
- Where do these governmental incursions into the market end? What happens if the U.S. automobile industry starts to tank? Or the airlines? Do we have to bail them out too? Where does it end? We're on a slippery slope of socialism here, and one need only look to the historical example of the former USSR to see how well that works.
- Besides, as a taxpayer, I don't want to be on the hook for business failures I have no control over. Nor do I want to be on the hook for the unrepentant malfeasance of politicians, bureaucrats, and Wall Street fat cats.
- Speaking of bureaucracy, the idea of giving Henry Paulson -- an unelected official -- a blank check for $700 billion to use at his discretion seems like lunacy. Our national debt is already $6 TRILLION. Fannie Mae and Freddie Mac already put taxpayer dollars on the line because they are GSEs (government-sponsored enterprises) that borrow heavily from foreign investors to do business. I resent the fact that Paulson et al (President Bush included) are out there fear-mongering, telling us that we have no choice but to further compound the taxpayers' outlay or face economic meltdown. Isn't bureaucratic incompetence and corruption partly to blame for this mess in the first place?!? Sorry guys -- the economy may be having problems, but I'm skeptical about the Chicken Little approach. If we need a solution, I'd prefer a thoughtful, non-Marxist one to the put-the-taxpayer-in-a-hammer-lock variety.
- Planning to start my interaction with Gary Grieg's defense of Lakeland soon -- stay tuned!
- On a lighter note, I really enjoyed LSU's comeback at Auburn on Saturday. Looking forward to seeing them develop over the rest of the season. It's going to be a great ride again this year. Geaux Tigers!
Blessings,
Rob
aka The MonT-SteR
Labels: 2008 election, Barack Obama, John McCain, LSU
Comments:
On the banking bailout...
Banks are businesses (for better or for worse) which need to show a profit. To show a profit they need to bring in income through interest on loans. So they started finding a way to make mortgage lending a growth business instead of a staple. That's where the new loans, like 100% financing, 5 year interest only, etc., came onto the market. Then with these new kinds of loans there was a similar rush to give the loans to anyone, with little or no interest in the long term ability to pay when secondary terms kicked in. This is partially the fault of unscrupulous lenders who simply lent money to anyone then sold loans to more respectable banks. (No regulation = complete legal but totally irresponsible) The people applying for loans are also at fault for borrowing huge sums of money without reading or understanding the risks they were taking on. Also at fault--investors and investment managers who encouraged the growth as a shareholder and only looked at the profit.
So now we're at that point where the borrowers aren't paying back the loans (for many reasons), the banks that own the loans are foreclosing instead of renegotiating, the mortgage lenders aren't making new loans because the banks are finally not interested in buying them, and the banks have a lot of houses instead of a lot of cash. The market side of things is that real estate (i.e. mortgages) was sold to an investment industry as a commodity that could only go up. So now you have people's retirement savings wrapped up in the value of real estate across the country. You also have banks that are paying more attention to who they lend money to and tightening their belts.
The net: people are losing their homes to foreclosure, banks are lending less money for everything, not just housing, and the stock market continues to tumble because the banks are struggling.
A solution that will encourage banks to renegotiate the existing loans on houses instead of foreclosing will go a long way to fix the problem. A solution that will also encourage ongoing lending by banks is also key to ensuring that people are able to buy houses, cars, college, and to start new business. Infusing cash into this industry at the business side with oversight to ensure the taxpayer is the beneficiary should go a long way to keep the nation from repeating the events that some consider caused the great depression.
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Banks are businesses (for better or for worse) which need to show a profit. To show a profit they need to bring in income through interest on loans. So they started finding a way to make mortgage lending a growth business instead of a staple. That's where the new loans, like 100% financing, 5 year interest only, etc., came onto the market. Then with these new kinds of loans there was a similar rush to give the loans to anyone, with little or no interest in the long term ability to pay when secondary terms kicked in. This is partially the fault of unscrupulous lenders who simply lent money to anyone then sold loans to more respectable banks. (No regulation = complete legal but totally irresponsible) The people applying for loans are also at fault for borrowing huge sums of money without reading or understanding the risks they were taking on. Also at fault--investors and investment managers who encouraged the growth as a shareholder and only looked at the profit.
So now we're at that point where the borrowers aren't paying back the loans (for many reasons), the banks that own the loans are foreclosing instead of renegotiating, the mortgage lenders aren't making new loans because the banks are finally not interested in buying them, and the banks have a lot of houses instead of a lot of cash. The market side of things is that real estate (i.e. mortgages) was sold to an investment industry as a commodity that could only go up. So now you have people's retirement savings wrapped up in the value of real estate across the country. You also have banks that are paying more attention to who they lend money to and tightening their belts.
The net: people are losing their homes to foreclosure, banks are lending less money for everything, not just housing, and the stock market continues to tumble because the banks are struggling.
A solution that will encourage banks to renegotiate the existing loans on houses instead of foreclosing will go a long way to fix the problem. A solution that will also encourage ongoing lending by banks is also key to ensuring that people are able to buy houses, cars, college, and to start new business. Infusing cash into this industry at the business side with oversight to ensure the taxpayer is the beneficiary should go a long way to keep the nation from repeating the events that some consider caused the great depression.
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: 9:00 AM
: 9:00 AM