My Instinct Was Wrong? Right!

I’ve been watching the talking heads on TV, and digging around on the NET trying to find out what the urgency of this deal is really all about and also who we’re trying to rescue here.

I’m certainly not educated in economics, so I have to rely on those more educated in these matters for guidance. But I’m not sure how much economics knowledge it really takes – seems more a matter of common sense in many ways.

What happened to the concepts of “free markets” and “you win some, you lose some”? So, a bunch of people made bad financial decisions, starting with the banks like WaMu offering negative amortization ARM mortgages – followed by the poor saps that suckered into those mortgages to purchase houses that are grossly over-valued – followed by the companies and their investors that bought up the bundled mortgages.

If I make a bad financial decision, I’m the one that has to eat it. Why should the Feds come to my rescue? or the Taxpayers for that matter? Let them fall – they made the bed, let them sleep in it.

Yet apparently if we “let them fall” a recession, or even worse, dare I say, a “depression” is imminent. Granted, it’s going to hurt some – it will hurt all those people who can’t pay the mortgages, the institutions that hold those mortgages, and the value of those inflated properties will drop along with the tax base tied to those values. Local and state governments and school districts that depend on those taxes will have to scramble to cover the shrinkage. Not gonna be easy.

But will $700 billion really fix the problem? or are we just postponing the inevitable recession/depression? I’m trying to be careful what I ask for here, but I, for one, would rather deal with it now BEFORE we waste a minimum $700 billion bailing out people who don’t deserve to be bailed out or rescued.

If we’re only postponing the inevitable, then in a few years, we’re going to have to pony up to the bailout bar again. For one possible scenario – read this futuristic news report from Bloomberg.

Sept. 23 (Bloomberg) — It is October 2017. The Bureau of Economic Analysis has just reported that the U.S. economy grew at an annualized rate of 1 percent in the third quarter.

CNN pointed out today that $700 billion will buy more houses at today’s median home price of $203K than there are mortgages in jeopardy – so what’s up with that? and who’s getting the rest of the monies?

The urgency is the one thing that makes me leery of this whole thing. This problem has been coming for years, and now all of a sudden, we have to act? Perhaps we should wait – ride out the storm for a few weeks – and let the new administration handle this. President Bush and Treasury Secretary Paulson are both lame ducks who won’t even be around to see this project through.

Despite the urgency and “must do something” approach of the White House and Congress, apparently most of the public is NOT for this. From a Bloomberg article

Calls to congressional offices are running 50 percent ‘no’, and 50 percent ‘hell, no’, Democrat Paul Kanjorski told CNBC today. ‘Out of 100 calls, you are lucky if one of them is positive.’

As for those that are better educated than me – the economists – check this read on Bloomberg’s site.

Sept. 26 (Bloomberg) — More than 150 U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

I’ve found this site to be a great source of info http://themessthatgreenspanmade.blogspot.com/

It’s Friday and investors don’t like uncertainty, especially over a weekend – gonna be a tough weekend for some I suspect.