Monday, September 22, 2008

No to the bailout

I disagree with my cohort, the Anarchist, on whether the Federal Government should bail out the "banks". Let me start by saying the Anarchist is a pretty smart guy who stays well read but I just can't agree with his supporting the bailout of any of the banks.

I start with the premise that we are a capitalistic society, we are not a socialist or communistic society that is controlled by the government. The beauty and curse of capitalism and democracy for that matter is that there are swings, there are ups and downs but they are controlled by the people, and by people I mean the big 225 million American citizens. This means that sometimes people get screwed over and when that happens they get pissed and are more careful and require more to get their support later. This is the whole idea of economic bubbles, when they burst some people take a licking but they will be more careful next time if they are smart. If they are not smart then that is their fault on some level of social darwinism. If we do a bailout like is being discussed then we are not the capitalist country that many of us want and what almost all Americans think of this country as. This is literally a principle of Americanism that a bailout such as this erodes more than wars preemptive or not or most of the other crazy issues people think about.

Congressional Democrats seem to not like the bailout idea b/c it would not provide an ownership stake in companies that we as a nation would be bailing out. WHAT? That is even worse in my estimation. Ownership stake is like saying we need a home loan or to get some credit from Chase to buy a new t.v., lets ask the Kremlin for it. If you think I'm over exaggerating just stop and think about the communism system that just helps regulate the economy by running certain sectors. That is what this is.

However, the President seems to be pushing to on some level just give the industry the cash to keep them from going under "because it can drag under all sorts of other things like PMI lending" (I'm paraphrasing the Anarchist here). My problem with this is two fold.
  1. We are rewarding a companies who screwed up by making a bunch of bad loans and this is just wrong. They screwed up and just b/c the Bush administration and whoever they have that was supposed to be regulating them (Fed Banking, Fed Reserve, Fed Trade Comm, you pick) screwed up doesn't mean they should get a free pass.
  2. If I was in charge of one of the companies who is not going under I would be super pissed. They did it right, maybe even forgoing some at the time profits, and as a result they got screwed a bit back then and now their competitors are getting a freebie to stay in the game. If I was representing (or a shareholder) in one of these quality firms then why the hell would we act right in the future, what is the benefit, just let it all hang out and try and make as much as quickly as possible b/c Sugar Daddy government is there to bail us out of our bad decisions. such a slippery slope it is ridiculous.
Now I'm not one who wants the collapse of the free market but Americans have to at some point have to make a decision about who we are. Are we the people who we have always been that have dominated the world since basically the industrial revolution in the 1880's (or at least since our entry into WW I) because of our capitalist principles. It is these same principles that allowed us to beat "the evils" of socialism and communism as seen most effectively with the USSR's downfall in the late 80's. Unfortunately for us as Americans there is a bubble and it has to burst (if it hasn't already) and we can deal with it without selling out who we are as a country and a people. I don't think that banks across America will fall and everyone has to stand in line to get their money from the FDIC, when the banks that are insolvent go under there will be someone their to buy them before they completely crash out, that is if the government isn't their to be the alternative. If the government is there then why the hell would anybody want a bunch of bad debt. With this I also realize that the bankruptcy code is completely screwed up and way too lenient but those were the rules when we started the game and that is the hand we are dealt so we need to deal with it as the Americans we are not the socialist these bailouters want to make us.

And hey, on the bright side I hope something like this who most effects the elderly who actually need that money that has lost 20% in the last 4 months will have social security solidified for them and some changes about medical expenses can be in the works.


The Library Guy said...

One problem. The U.S. has been socialist since at least FDR's New Deal. While many people may dislike welfare programs, farm subsidies, and bailouts of essential companies, they are necessary to the continued function and survival of the country.

BSquared said...

while I do agree this country has socialist tendencies (which I do not agree with for the most part)I do not think we are complete sell outs. At heart we are generally still a capitalistic society with a few screw-ups, the biggest being the general idea of "welfare". However, I think if we participate in this bail out that influences the entire financial system then we are therefore completely changing the financial system and kicking capitalism to the curb like never before.

BSquared said...

I would also include that I think with progressive changes (not immediate but dang near close)to welfare, farm subsidies and bailouts to "essentials" like airlines which aren't really that essential and if they are will be bought out by somebody b/c people will be willing to pay for it then those too could go away with the correct leadership. I'm not saying that leadership is running now or if it will ever but I think it may be our only hope.

Shane said...

"I don't think that banks across America will fall and everyone has to stand in line to get their money from the FDIC, when the banks that are insolvent go under there will be someone their to buy them before they completely crash out"

When the banks are that insolvent, any entity with the money to buy them out won't be able to do so because their money is locked up in the nation's frozen financial machine or otherwise lost in stock and other investment markets which have hence crashed.

"All" that's needed is for an entity to buy out all the bad (il-liquid) assets from the banks so they can continue to do business. Once things settle down, the buyer of these illiquid assets could sell them at likely a substantial profit.

The only player with the stones to do this is Uncle Sam.