Therefore, I'm stumped regarding what is the best solution. Despite my research on bailouts showing some positive effects in the past, I still do not trust Republicans and the Bush Administration, and remain concerned that it's simply one more dirty scheme to harm government and line their pockets with ill-gotten gains. I still do not trust their version of a bailout.
- The Hoover administration created the Reconstruction Finance Corp. (RFC) in 1932 to spur economic activity by first lending money to financial, industrial and agricultural institutions, then injecting capital into thousands of banks by investing in their preferred stock. By the time it closed up shop in 1957, it had made loans of about $50 billion.
- The same held true for the Home Owners' Loan Corp., started under FDR in 1933 as part of the New Deal. The agency helped stop a flood of foreclosures by buying $3 billion worth of defaulted mortgages and refinancing more than a million loans at lower rates and longer terms.
- The government also created the Federal Deposit Insurance Corp. (FDIC) the same year, guaranteeing the safety of checking and savings deposits in member banks following a wave of bank failures.
- The '70s and '80s brought a series of government rescues of corporations — including Lockheed and Continental Illinois National Bank and Trust.
- 1979 brought the bailout of Chrysler Corp. - the nation's 10th-biggest company had fallen into near-collapse amid high oil prices that tanked demand for its big cars, and the Carter administration arranged for $1.2 billion in subsidized loans. That spurred a Chrysler comeback and ultimately netted a profit for the government when Chrysler made good on its obligations.
- The S&L crisis in 1989 was the costliest intervention ever, creating the Resolution Trust Corporation, a government-owned asset management company charged with taking over troubled assets and paying depositors who lost funds. It involved over 700 failed S&Ls.
Come on people, we need to insist that this bailout is done properly. We need to admit that Paulson owns over $600 million in Goldman Sachs stock, and that he might wish to bail himself out of danger. Please contact your legislator - http://www.votenobailout.org/ is one website that will force Congress to consider their actions more carefully. In the end they will want to vote yes OUT OF FEAR (they won't want to be blamed), but there's nothing wrong with forcing them to consider all options, and to make sure they do it right.
Every bone in my body tells me that any bailout has to focus on the people at the bottom of the economy - their actual mortgages, not the institutions at the top. In the same way derivatives are mostly diluted junk, buying the institutional mortgage paper will not restore confidence. The homeowners themselves need to be bought-out. The government's plan to buy the risk or the paper will not effect the floor of the economy. To put it in terms Democrats can understand, IT WILL NOT TRICKLE DOWN TO US! So, I see the Bush/Paulson bailout as flawed, unlike some of the bailouts in the past. The people who spend to create this economy will not feel more secure. The institutions will tighten credit in the end anyway. The dollar will fall. There are too many flies in the ointment for my taste. I think we need another plan.
Overall, I still believe that we have many more problems in this country than bank/institutional debt, so my gut tells me there must be a better way to spend a trillion dollars of borrowed money - why does it have to be borrowed anyway, isn't that a red flag in itself. We should try to create more jobs and spur more domestic growth, and develop programs focused on people, not institutions. I'm nervous that we're being fleeced again, and that the American people keep trusting the same lying crooks who keep stealing from them - over and over. So, in the end, I think it would be better to wait and do it right, then to do it wrong and waste money we do not have to waste. I also question whether the Republicans are using the bailout issue to set us up - it could be the "October Suprise" we fear from them. Please offer your own opinion. Thanks for listening.
Tuesday's Political News/Rant #2 - Michael