I feel this deserves its own thread. Sort of a spin off of sorts in relation to the economy thread, but it's independent in nature of it.

This debacle in the financial sector of our economy is really disturbing. And I can't quite put my finger on who to actually blame and who is actually responsible for this. But when you boil it all down, what is essentially happening here is the nationalization of our financial markets to support America.

What are the pundits saying? We need to bailout Wall Street so that we don't feel the effects on Main Street? Isn't that it? We gotta bail out Freddie, and Fannie, and Goldman, and AIG because if we don't! There will be dire consequences to us all.

And maybe that's true.

So...in the end...why should these entities be kept private in the first place? No. I'm being serious. If the public is supposed to bail these mother fuckers out with tax dollars simply because "they are too big to fail" because "it's for our own good" then why the fuck should private operators continue to hold these assets?

I think it deserves questioning.

I'm not one to support this sort of bailout. In the end, I believe that this situation developed because of enormous banks partaking in risky business. The people who ran the banks wanted money, and the only way to get their cash was to satisfy shareholders. They utilized their enormous size and leverage to their advantage. I'm pretty sure that every major player in all of these banks KNEW that what they were doing was wrong. And they also knew that they'd get bailed out. So what you had was bankers and lenders throwing out money for whatever reason to gather more mortgages, and gather more people under their lending blankets. This allowed them to meet their targets, which garnered massive compensation to everyone operating these banks.

At the time, it was just a risk. If interest rates remained at the historic lows they would continue to do well and their institutions would remain strong and profitable. And if interest rates jumped in the coming years and their investments turned over, the government would have their back anyway...ya know, because they were cognicant all along that they were "too big to fail." The institution as a whole was too vital to fail. So it really didn't matter what they did, our how sound their decision making was in the first place. They knew bailouts would ensue should the bottom fall out.

It's interesting too look at the golden parachutes these head honchos are gonna get. These people made a lot of money out of risky practices.

Which begs the question about the precedent that is being set here. Here we have an entire institution that has gone under and has the potential to erode our entire country. What about other institutions that are "too big to fail." What does this show them? It's not good. It doesn't reinforce sound business practices, and if anything, it will only serve to promote bad business practices, or risky business practices.

Is Wal*Mart too big to fail? What about Microsoft? How about Cisco? What about the Tele-Com industry? I mean, what if all the phone companies do something inherently stupid and all end up on the verge of bankruptcy? Then what? More bailouts?

So again, if it's too big to fail...should it just be nationalized at this point?

I dunno about too big to fail, but I think if it's essential to the public interest it should probably be nationalized in the first place.

Economics is hard.

Dinosaurs were too big to fail...

can i buy pot from you?

Ewh, I cant stand the smell of it.

pinko.

Who decides what is essential to the public interest? If I spend my whole life coming up with a cure for cancer, should that be nationalized? What if I create a new invention that revolutionizes society? Nationalize that too?

You raise some good questions about all of this, LW.

On principle I'm against this whole thing, but the consequences of not doing anything are what the legislators are grappling with right now. Credit will likely freeze and that means that small business will be hit hard. Then the stock market could tank, taking people's 401Ks down with the ship. In the end, I don't think we have a choice but to go ahead with the bailout.

You are correct in saying that this promotes bad business decisions, and I'm sure the US auto companies are getting ready to hold out their hand for the next bailout because they have too many trucks and SUVs rotting on their lots and are still, overall, producing cars that are inferior to imports. They dug the hole they are in, so why should the US government (i.e. our money) shore up their screw-ups.

Poor Ronald Reagan is doing backflips in his grave right now.

The Soviet Union was too big to fail, but to nationalize would be...oh, nevermind.

So.. is the government paying off my house, or what?

Sure, if the market can't properly distribute your invention. I'm sure a few bucks can be found to throw your way.

Certain things need to happen for the good of society--sick members need to be taken care of, credit needs to be distributed, food needs to be available. when the market fails to provide necessities it is the governments obligation to pick up that slack. That's why we have governments in the first place.

http://www.ft.com/cms/s/0/83bfe68c-8a8f ... fd18c.html

The House of Representatives on Wednesday approved a $25bn package of low-cost loans to help hard-pressed carmakers and their suppliers finance plant modernisation at a time of restricted access to public capital ­markets.

The automotive loans are separate from the proposed $700bn bail-out for the banking sector, which is still being debated in Congress. The House approved the measure 370-58, setting the stage for Senate approval within days.

*vomits*

When the government has decided to spend $700 billion of our money, then it sure would beg the question of why we aren't entitled to reaping the rewards , i.e. profits, from this thing. Amazing, now instead of being a welfare state for the poor, we're a welfare state for multi-billion dollar business interests.

Anybody here willing to go the alternate route and pull a Japan and struggle through bad times for the next 10-15 years to avoid this kind of ultra-intrusive government action?

AIG was essentially nationalized.

The big question I have is, will it really do any good? As I think thodoks alluded to in the bigger thread, if this money is coming from thin air, will the US just try to inflate its way out of this? That has all kinds of consequences, as well.

Maybe I need to read more, but I'm kinda of the paleo-conservative "let 'em fail" thought right now.

This may be one of those issues in which the rubber meets the road regarding liberalism. Union honks, closet Marxists, and die-hard socialists will probably welcome it, while most only-slightly-liberal-unless-it-is-going-to-cost-me-too-much-and-make-me-uncomfortable people will question it.

the bolded is what bothers me most about all this

I'm personally a fan of this new scheme.

- Banks get in trouble by lending money to people who can't pay it back.
- Banks file for bankruptcy
- Tax payers bail out the banks
- Government theoretically makes a profit
- Government takes said profit and uses it to so that people that can't afford homes can afford homes.

It's just fantastic.