So after careful consideration, I personally believe the $700+ billion bailout plan is the wrong course of action. It goes against everything we believe in terms of capitalism, and the free market.
While unfortunately, the situation we are faced with was created due to unregulated and unrestrained capitalism at its finest, a socialize bailout is not the answer. We need to let the market auto-correct, as it certainly will, and introduce a greater level of regulation to the world of finance as we move forward, just like what we see with other regulated industries, such as insurance.
Without regulation, why would the capitalists on wall street do anything less than try to maximize profits, via leveraging assets 60-80 times over, effectively turning wall street into a casino.
Well guess what, the real estate market crapped out, and they lost everything on a collection of risky bets.
Unfortunately the casualties of such a massive failure will be widespread, and felt my most, if not all of us, but I believe that is the way it should be.
If artificial interest rates, and artificial valuation got us into this mess, why would anyone think that an artificial solution, in the form of a socialized bailout package, estimated to cost between 7-10K in tax payer contributions, per American family...be the right solution?
On a more micro scale, if a company runs its business poorly, it will be forced out of business by a better business, whether bigger or smaller, so why should it not be the same with the likes of AIG, Fanny Mae, Washington Mutual, Freddie Mac, etc?
Why do these companies, who have proven to be a failed business model, deserve a second chance at the expense of all of us?
Call it a lack of empathy, but I think the people responsible for making bad or risky decisions, should be held accountable for those decisions. Not only the executives at these mega-banks, but also investors in those banks, and home-owners who got in over their heads with interest only mortgages.
About a year ago, I lost about 50% of an investment I made into a mortgage company. While it sucks, I took my losses like a man, sold out, and avoided loosing the other 50% before it got worse.
I am sorry, but if a consumer is faced with foreclosure, then that is the market telling you that you haven't earned the right, and don't deserve to be a home-owner at this time, at least not at the level of home you are currently in.
I have paid my mortgages on time, every time, for the past 6 years, why should I be forced into investing into this rubbish?
What the government is asking us to do as tax-payers is unfair, and unjustified, and sets a terrible president.
Will things be worse in the short-term... maybe....probably, but until we get back to naturally market regulated levels, we wont be out of the woods, so lets just rip the band-aid off, get it over with, and rebuild from there.
Instead of coughing up 700+ billion in tax-payer money, basically calling it a tax-payer investment, without really knowing how that money will be spent, and why.... let the values of these failing entities fall to a level where they become appealing to a non-struggling, better managed entity, who sees the value in scooping up assets dirt cheap, with a high probability of a substantial return on investment.
The market has a way of rewarding good practices, and punishing unethical and often greed-ridden practices.
Let me paint a comparable picture for everyone, on a micro-level, just so we all know what this bailout plans to do :
If someone has a $30,000 BMW, that has plummeted in value, to lets just say $20,000, that they cant afford to continue paying for, is it fair for the government to "force" another buyer (the taxpayer) to purchase said vehicle for $30K, knowing full well that is worth $10K less than that? Hell no!!
Who's to say the value wont plummet further? Why should the seller get a free pass, earn back artificial equity on a poor investment, leaving the buyer with an asset they paid way to much for, that they may not ever see a return on.
Here is what the free-market dictates should happen...
The seller would be forced to reduce the sale price, to something that more buyers will find appealing, lets say 18-20K. So if purchased, that buyer would now has ownership of a balanced item in terms of cost/value.
If that is not an option, the seller can relinquish the asset to the bank, or worst case... file for bankruptcy.
Any questions... does the bailout still sound like a good plan?
...as you were
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