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He's doing it again.

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And just when I thought we would make it to the end of his term without another predatory raid on our grand children's future. He's trying to persuade congress to bail out his fat cat banker cronies with borrowed money. That's using bad debt to buy up bad debt. Over the past years, the fat cats on Wall Street have made piles of money by buying and selling debt. They had so much fun doing it, they intentionally overextended themselves by buying three times the debt they had assets to cover. That used to be against the rules, but the rules were changed. It's no wonder the bankers got caught short when the housing market faltered. By the way, Bush wants to buy bad dept from the banks and create yet another agency to 'hold' the debt. This is in addition to nationalizing the Fannies. All this from someone who claims to be interested in less government.

I haven't heard mention of forgiving any of the debt. I don't understand that, because most of the debt is bad because ordinary citizens have found themselves in a house that is mortgaged for twenty-thirty percent more than the property is worth and is mortgaged at higher than normal rates.They aren't going to bother with paying it off. It's hard to feel sorry for them. I've friends in the new house building business. Brokers were eager to write high-priced mortgages over and above the price of the house without a proper credit check. "Don't worry," they'd say, "we'll keep the payments unrealistically low at first, and the way the market is booming, you'll be able to re-finance with a standard mortgage in a couple of years. Why, you'll even make a pile of money on the deal."

Yeah. I really want to add to the national debt to bail these jokers out. They knew what they were doing; the risks they were taking. Still, wouldn't it be cheaper to work from that end? Cut the interest rate on the loans a few percentage points, Government pays the difference. Cut the principal 10 percent. That will make a bad loan good. And, it's not like the house prices will slump forever. Don't create another agency. Let the mortgage companies report it on their taxes, get a credit. I'll bet doing it this way would be a much cheaper route.

But no. Bush wants us to help the same persons who milked millions out of the tax cuts he pushed through the Republican-dominated congress during his first term. Tax cuts that a number of wealthy Americans claimed were too much and unfair to the middle class. Tax cuts that caused record deficits and forced us to increase the national debt in order to fund important programs and the Iraq war.

In my opinion the first and most important litmus test for a conservative politician is fiscal responsibility. Time and again our president has failed this one miserably. Look at how the national debt has ballooned during his time in office. The second test is less government. Check both the increased cost and the increased number of governmental agencies and employees over the last seven plus years. Another serious failure.

Two years ago, during the last congressional elections, social security default was the bell ringer. Don't hear much about that these days. I predict that by the next congressional election two years from now, just the interest on the national debt will be a larger bill than social security. We may have to borrow money to pay it!

Some interesting links:
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On September 21st, 2008 06:51 am (UTC), frumiousb commented:
Just to play devil's advocate here, do you really think that it is better to let the banks fail and allow people to lose their savings? Because in many cases, that's the scenario that's under discussion. I'm not really sure what I think about this situation. I'm certainly against bailing them out if there will be no accountability for the people who got themselves into the mess...
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On September 21st, 2008 02:30 pm (UTC), 7ony replied:
Several times in the past, the government has loaned large companies money to get them through a hard time. I see nothing wrong with doing that. Another approach, the one I favor, would be for the government to stand good for the loans and allow them to be re-negotiated, funding the loss in the form of tax credits. I think government backing would be enough to restore market confidence. The markets rebounded nicely when the administration just started talking about a solution. The housing market will return; it always does. I don't like the idea of forming another federal agency to allow the banks to cherry-pick their portfolios and dump the bad loans for face value. That's rewarding them for poor judgment. If I understand it right, the banks in question borrowed heavily themselves to leverage their buying power. Banks borrowing on faith, without collateral. I'd rather not reward that kind of behavior either. Over the past several years these institutions pocketed quite a bit of profit buying and selling these loans. Now they stand to get some more by selling the bad ones to the government.

To answer your question: no, I don't want the banks to fail. I want the government to do their job and come up with a solution that doesn't reward bad behavior and doesn't mortgage our grand children. The banks should share some of the loss and some heads should roll.

I'm retired; we live off our investments. Through mutual funds, I own parts of these banks and have benefited from their profits. Our assets have shrunk this past year and I have some corporate bonds I'm nervous about right now, but I'd take the hit rather than pass it on to future generations, which is what it appears Bush and Congress want to do.
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On September 21st, 2008 03:03 pm (UTC), frumiousb replied:
I guess that right now I just don't understand enough about the deal to really evaluate. I hear what you're saying, but I'm not as sanguine about the ability of the market to heal itself, I think.

I think that the reasons that loans aren't really being discussed is that this will not be sufficient to guarantee the bad debt in question.

I don't know the answer, I really don't.
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On September 21st, 2008 05:28 pm (UTC), 7ony replied:
I can understand that. I don't know the answer, either. The whole thing is way too complicated for me.
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