We've had some irresponsible lenders out there in the last few years. I'm pretty sure that everyone can agree on that. And let's not leave out the irresponsible borrowers. Let's face it - just because somebody tells you that you can get the money doesn't mean you're obligated to take it.
So... due to the irresponsibility of a number of people, we have a "mortgage crisis." Many homes are going into foreclosure, mortgage dollars are harder to come by (since the irresponsibility has proven to be incredibly short sighted - the mortgage industry has changed their tune), and the housing bubble has officially burst (making home values plummet, which further increases the foreclosures, etc...). What a vicious cycle.
Because so many mortgage holders are defaulting, and banks are sitting on houses that are worth sometimes half the amount owed on them, banks are in trouble. Fannie and Freddie are in deep doodoo... but never fear! The government is going to bail them out -- because they're too big to fail. This seems to me like insanity. Too big to fail?? I see... so since these large institutions have gotten insanely huge, it's now the job of the taxpayer to foot the bill for irresponsible behavior.
But that's not where it ends. Lehman Brothers is in trouble. And nobody in the private sector cares to buy them as things stand (at least that's what I can gather from what I read). Bank of America, after looking into Lehman Brothers, decided to buy Merrill Lynch instead. And now Lehman is still floating out there... waiting for help. But never fear! The headline today reads, "Fed Loosens Standards on Emergency Loans." Apparently, the Federal Reserve didn't want to provide a financial backstop to potential buyers -- but it decided to dramatically loosen its standards on making emergency loans to major Wall Street investment banks instead. Seriously?? This, right after lightly slapping the hands of lenders for their irresponsibility? Whatever... this is why the government shouldn't be in charge of much at all.
"In an obscure but highly important announcement late Sunday evening, the Fed said it would let Wall Street firms post as collateral much riskier assets - including equities, junk bonds, subprime mortgage -backed securities and even whole mortgages - in exchange for emergency loans through the Primary Dealer Credit Facility." Ha! So our government doesn't want to provide the "backstop," but they're willing to take as collateral subprime loans?? Isn't this pretty much the equivalent (in today's market) of accepting as collateral the dog doo from the backyard?
This is one of the things I find so irritating about government. When something is done in the private sector that leads to disaster or near-disaster, the government is all about inquiries and investigations -- and attacking the irresponsible corporations that created a mess. Think: Enron. But now, with bailouts and backdrops abounding, the government decides to take more of the people's money and sink it into highly risky endeavors with the same people who were irresponsible to begin with.
This wouldn't be anywhere near as irritating to me if the government somehow managed to create wealth themselves. But they don't. Their plan is just to suck us all dry. And then the presidential candidates run around saying they're not planning to raise taxes! What a joke.
Here's the deal: Barack Obama is intent on raising spending to such a degree that a hike in the tax rate of the most wealthy wouldn't begin to cover it. McCain, while not subscribing to the same amount of spending, hasn't been overly vocal about stopping the bailouts, etc... either way, they're going to have to raise taxes considerably... and that won't even keep up with the insanity that passes for policy in Washington.
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