I am not an expert, or even a pert, on the economy. However, the idea of this large of a bailout has red flags jumping for me too.

I don’t know that it is fair to put the entire blame of this on the Bush administration, as some of the policies that encouraged risky lending(i.e. mortgages to those with less than average credit) were pushed by the previous administration(or so I heard). Could be wrong, forgive me if so.

As a 2 time supporter of Bush, I will say that I have been less than thrilled by the last 4 years on a domestic front. Flynn Blake is right about the other industries lining up for handouts. Free Market, I think not.

Polls and such notwithstanding, I think this next election is Obama’s to lose based on the economy.

A couple of (perhaps) wishful thoughts about a Gore presidency are not well placed in my mind. We can’t go back and change that, no point in crying anymore. But, with that said, I can not say that Bush has been good on the domestic front. We’ll never know what would have happened otherwise, but we do know what did and hopefully we don’t futher bankrupt the American People with corporate buyouts.

I agree with Mr Sickles that any bailout needs to have some restrictions placed on those that are ‘benefitting’ from it.

i think there needs to be a few conditions to any bailout.

since the government’s is taking on all the risk, it’s gotta reap the rewards, specifically, they need a shitload of stock in any company that seeks their protection. there’d also need to be acceptance of any regulations that are reinstituted. i’d also like to see the financial industry give up their lobbying and campaign donation privelages for a period of time, so as to lessen the likelihood of them muddying the waters following the bailout, and blocking any legislation that might seek to regulate them.

if this does spread, and the airline, and train industries seek protection, i’d be very open to socializing the industries, because for the airline industry, the price of a one way ticket is unsustainably low, and for the train industry, there needs to be massive, rapid expansion.

there also needs to be a massive tax on gasoline to provide the startup revenue to get through this, and the next, crisis. even with the recent pullback, $200 per barrell of oil is not out of reach. i think the next administration needs to do anything possible to drop the price of oil, whether it’s drilling in anwar, offshore, releasing the SPR, it needs to go down. and then it needs to be taxed to hell. instead of paying the price of gas overseas, it should be reinvested in the infrastructure of this country.

oh, and i think someone needs to come out and say what would really happen to america if mccain’s financial plan comes to pass. tax cuts + gulf war + massive bailout = 20 trillion dollar national debt inside of 5 years = chinese republic of america inside of 10.

The way our elected leaders from the left, right, and center treat the rank and file populace.
Risk is for the small, bailouts for the large… it doesn’t make any sense to me.

I know that I’ve been fairly successful in my profession, and I’m happy to have the opportunity to do something I enjoy, but I make certain decisions financially. I can afford a nice house, but I didn’t go extravagant because I didn’t want to take the risk of an ARM… I took a safe 30 yr fixed rate on a modest house. I have refused jobs that paid more money because I chose a more risk-averse path.

In times like this, these decisions should make me feel wise - that I’ve done things the right way, and I should be rewarded for it. but it doesn’t. It makes me feel like I’ve been duped. I’ll still end up paying for everyone else’s failed mortgages while my home price slides back 40 or 50,000 off the paper gains I’d seen the last 7 years. Of course, my local government came through at the peak of the market to make sure home values were re-assessed for higher property taxes first.

We’re already socialist in my view. I’m getting really tired of constantly being asked to pay the bill for other people’s mistakes, but only tangentially benefitting in those rare instances when the risk pays off.

The comments of others regarding the airline industry is a great example… I’m seeing flights that are packed while the airlines treat you like crap unless you fly every week. Prices are historically higher than they’ve ever been and they’re still crying poor? They’re mismanaged… Raise the prices until we start seeing some decline in flying, and stop treating your customers like a nuisance instead of your business, and maybe you have a chance. This might reduce significantly the amount of air service to some smaller markets, but that probably also reflects true demand.

The market can make massive mistakes at any given time. But over the log haul it is the most efficient allocator of resources. In the short run the market is a voting machine (or popularity contest) but in the long run it is a weighing machine (the market and intrinsic value will align over time).

Someone mentioned the Gramm bill which did away with Glass-Steagall Act separation of commerical banks and investment banks. As one can see by the last 2 large i-banks opting this weekend to convert to bank holding companies (Goldman Sachs and Morgan Stanley), the market dictated to THEM that they needed to become more regulated, lower risk takers with a more solid financial backing via insured deposits. That’s right, you and me, joe public, are the most secure LENDERS to these institutions.

Goldman and Morgan were experiencing a run, not due to their subprime bets, which were relatively small, and in the case of Goldman very well hedged, but because investors got spooked by the model: short term financing of long term lending in difficult to value or illiquid investments.

To a large degree government involvement helped to cause this mess (although obviously greed and incompetence in the market did as well).

The community reinvestment act forced banks to make loans to people with default risk. Government encouraged home ownership beyond the ability of people to be homeowners.

Mark to market accounting rules forced institutions to take huge writeoffs based on the curent almost non-existent markets for certain home mortgage backed securities, often beyond the actual likely long term return on these investments. These secutrities pay over a long period, yet accounting rules forced them to take cuts based on panic levels.

Further, government favored oligopolies, the rating agencies, massively mis-rated securities. There was lots of crony capitalism there, as they had incentives to give high-ratings, but the government also mandates you must have certain levels of securities rated highly by these government recognized raters (Moody’s, S&P etc.).

The Fed is quasi government, but under Greenspan one could argue monetary policy was far too loose after the dot-com bubble burst.

The american people themselves got a little greedy and short-sighted with the housing bubble. I am sure most people knew that an ARM can adjust on them, etc. There were incentives to roll the dice though. Mortgage tax deduction is a huge subsidy to encourage home-ownership, and with very low rates, negative amortization, etc., why not dance until the music stops. The punishment has actually been very small. Losing a house you couldn’t afford to begin with in many cases.

Also, the incentive structure on wall street nd in hedge funds was and is perverse. Huge bonuses for current year results, but they don’t make you give it back in the bad years. This is a problem with entrenched, managment friendly boards and shareholders not having enough say or knowledge of management compensation.

I don’t think folks no hw close we came to melt-down last week. Money market funds faced a run. People were pulling money to put under the mattresses. The bailout clearly became necessary.

Ultimately, i don’’t think the taxpayer will take a huge bath on this. Done correctly via reverse auctions, I don’t think banks are going to be getting too much of a sweetheart deal (certainly the shareholders of bear stearns, fannie and freddie, aig and lehman don’t feel bailedout-they have essentially been wiped out). This is more to wipe the slate clean so credit can thaw a bit.

And the folks really bailed out, bondholders, include your bank, your insurance company, your pension fund, etc.

In any event, i don’t think socializing a bunch of industries is the answer, or even socializing medecine more than we already do. As our system is currently set up, tax breaks for health care benefits from companies, people already have too litle incentive to economize their lifstyle and health care choices. Like the chunky fellow at your office who doesn’t work out, smokes on his break and eats mickey d’s, while you haven’t been sick for years and take good care of yourself, but you pay as much for insurance via your company’s plan and don’t have large health bills to pay.

If a bakery goes under because it bakes terrible bread, the government doesn’t step in with a bailout. So when banks whose only business is money go under, why should the government step in? I agree with John’s point that new (or revived) regulations would bring out calls of socialism, but if they’re going to remove the risk and incentives from a free market, then aren’t they already moving in that direction? It’s socialism for the wealthy.

I say these people get to have it only one way or the other. Either they get a true free market, with fewer regulations and no bailouts, or they can be further regulated and maybe have their asses saved one more time.

I hate mixing baseball and politics. And John I enjoy your baseball analysis even though, on occasion, you slipped in leftist political references in here…but I must respond….

There is enough blame to go around to everyone in this crisis……and blaming Bush for everything (from the toast burning to the car accident down the street) is getting real, real tiresome. What about the Dems who were asleep at the switch? Where was Barney Frank, who said that FNMA was a “healthy” institution just a few years ago. Is it possible that his and Ted Kennedy’s great push to make loans to “lower income” individuals played at least some role in this?

And just what is Obama’s stance in this? If someone knows the please alert the national news media, because no one can seem to tell me what his solution is in this. The only thing I hear from them is that we need to exercise our “patriotic” duty and pay more taxes…please. That is the last thing that we need to do to people who are suffering…take more money from them!

When I didnt make alot of money, I always leaned toward the Dems. They generally looked out for the poor, while the Reps looked out for the rich. Now that I make a very healthy living. I am in a much higher tax bracket. But some things have dawned on me. People who are blessed enough to make 200K or more( and maybe the number should be lower) have alot of advantages. They usually have assets that can be protected by slick accountants and they pay minimal taxes, and sometimes none on. Secondly, the rich are more likely to be receiving dividends, and thus are benifitted by the lower taxes on those as well. I read a magazine article where Warren Buffett said (paraphrased here) that he is willing to pay his part, and feels he should be paying more. (I know he is sickly wealthy but he has a point). If you are blessed enough to be Ivy educated or a succesful businessman or whatever, you should be wiiling to pay higher taxes. I am not a fan of bailing out poorly run companies either. I was extremely OPPOSED to bailing out the stupid airlines after 9/11. They were run horribly before that terrible day, and they simply took advantage of the governement. I didnt see the governement bailing out other companies affected by 9/11 like my friends travel agency. Her business declined 60%….
In closing, I do believe that generally, every politician lies to us. And I simply dont trust anyone. We lower taxes on the rich and then raise property taxes. In Texas, the property tax averages less than $2000 for a home. (thats the average). In NJ where I live it averages just over $5000. Huh? I am more confused now than when I started writing this… ugh.. my head hurts.. I need an advil.

that this is seriously the most civil economic/political debate the internet has ever hosted?

Hey John…… Please stay with what you know best… minor league ball players.

I wouldn’t venture out into the Political arena on this subject if you don’t know much about it, and by your own admission, you don’t. Otherwise you may find yourself on the short end of some of that free market money that people like myself toss around.