I disagree with some of this but to make it readable online....
Carnivore, you have a good argument for the Bailout plan.
As an auditor for a public accounting firm in NY, I want to argue against the current bailout package.
First, your argument has a very aggressive theoretical approach. You have laid out the bailout as if it isn't to be implemented now, the world is doomed. As someone who loves statistics and following prices and market movement, it was clear in 2006-early 2007 that home prices were extremely inflated and obviously some sort of adjustment had to come soon. As to the cause of the surge in home prices, it's simple who's to blame, the Fed.
They decided to keep lowering interest rates because the impact was seen as fovorable, as if these leaders never learned basic economics... It's obvious they knew that at some point, the bubble would burst. Yet, they decided to use an economic policy of creating a market bubble. I believe the accountability rested with them for this reason, they were unable to control what they started... and as much as it's easy to see it as a domino effect, I think it's the multiplier effect that is really taking effect. I don't think they should have continued to drop rates as fast as they did if they knew they wouldn't be able to quantify or put a stop to the effect.
How come deregulation continued even as they were effecting such laxed policies?
It is obvious they knew any financial institution w/ half a brain would push as many easy mortgages through as they could, knowing that the market for such instruments would remain active as long as the bubble didn't burst. Take Bank of America as an example of an organization who played it safe though, they did not give a mortgage to just anyone who wlaked through the door.
My father is a real state broker and my uncle is a mortgage broker. Their job is to push as many contracts and mortgages through, as long as the banks think the customer is qualified. See where I'm getting at?
This was the result of the continuous deregulation... banks and other mortgage providers were pretty much allowed to set their own qualification measures for customers. Most were as soft as possible when approving customers for loans. It is human nature to ride a good wave, and it is humans who run organizations. I think the Fed should have made some attempt to regulate the intitutions' approval processes, bu simply denied anything negative could happen.
Anyway, do large companies who are significantly tied to the performance of the economy be bailed out of needed?
I think it's necessary for some. Still, if a $700B+ bill could be passed, why not pass another $100B as aid to homeowners accross the country who are at the brink of losing their homes? I think this would do a lot in terms of regaining confidence in the markets. The negative impact is inevitable, so might as well help everyone.
Also, you say the fatcats are not abusing their privileges? BS! How come after the first round of the AIG bailout was passed a group of the top officers of the giant went on an extravagant $500,000 yatch party? Where's the regulation there?
I know the answer to all of this is not easy, but if the taxpayers are going to bear some of the burden anyway, then why not help everyone then?
The truth is... 95% of people in gov't are not qualified to make financial decisions of this sort. And those that are cannot do anything without the consent of the majority, which for the most part is made up of individuals who have failed miserably at running various businesses in the private sector.
Incompetence and ignorance are a recipe for disaster. I think too many companies are going to cry for help bc they think they can get bailed out, and the financial pressure this will put on the gov and the amount of confidence that will take away from investors will be even more difficult to shake. That plan is no good if it doesn't at least help fight the root of the current problem, which is homeowners not being able to pay their mortgages and handle their monthly expenses well enough that they can spend again and boost economic activity and confidence in the markets.