Wednesday, September 17, 2008

In the Midst of it All

So, something worth noting. I was privileged enough to attend a meeting this past Monday with all of the county Republicans whom are seeking election this fall. There were many of them there, along with the State Rep. Bill Caul. It was a great opportunity for me to introduce myself to all of them, tell a little bit about myself, and get to sit on the meeting. I also got to have a pretty good discussion with a small business owner about how raising the minimum wage puts the middle class in a crunch.

Overall, it was a really good experience. I get to attend these meetings every month, and we're even supposed to be working on a fundraising event in the area. I trust that all of you locals will attend. Obviously, I don't plan on seeing any of you from Wisconsin or Pennsylvania there.

I figured while I have you all here, I'd like to get my voice out there about the current "economic crisis", as it's been presented in the media. There's no doubt that what's happening in the market isn't a good thing. With the buyout of Fannie May and Freddie Mac, we saw how the government stepped in and saved these mortgage finance companies. Although it's imperative that we keep these companies in business, this is going to cost the American tax payer a lot of money. The $85 billion to bail out AIG in the past 2 days is another scary thing altogether. When these top rate companies start to fall, it creates uncertainty in the market. Uncertainty leads to massive selling. This is why we've seen the Dow drop by over 5% in the past two days. These are huge gouges in the market.

So here is my question to you:

Should the American tax payers really be put on the hook to bail out these mismanaged private corporations?

I want to hear your answers to this. I already have mine, I'll post it after I hear from you all. Even if you're not really into this sort of thing, I want to hear from you. Give me an honest opinion, please.


carriegel said...

ok, i'll go first.

my first thought on the subject is "no".

when d was graduating all those many years ago steel was spiraling downward for many reasons. imports, poor planning, a highly paid work force. in short, they had gotten fat and happy. and the result, almost all of the big mills went bankrupt or just closed shop. pittsburgh really suffered but now 20 some years later, mills are smaller, much more efficient and making money. the weak are gone and the strong and smarter have survived and the steel industry is better for it.

the auto industry is going through the same thing and when it is all said and done the best will survive. no bailouts.

i know its painful for those that lose their jobs, pensions, pay checks but it is not the government's job to bail businesses out.

as i write d is in new jersey at his semi-annual board meeting discussing what direction our company should go in. where can we cut costs? how can we be more efficient? is there a new market that we could exploit? hopefully, they make the right decisions so our company stays in business and remains profitable. but if they don't, we fail as well we should. on the other hand when we are making money i don't think it is fair that the government takes windfall profits. those that take the risks should reap the rewards.

now we come to today. the problem with the banking crisis is that it is so far reaching. a panic in the markets could have a long and devastating effect on the whole country and i think that has to be considered.

am i angry? darn right. i lived responsibly. i didn't buy more house than i could afford, i didn't see dollar signs giving mortgages that i knew couldn't be paid back, and i don't think it is a right that everyone should be a homeowner in this country unlike the government which encouraged this behavior on both sides. but now i am going to have to clean up the mess which will help protect my home value and money in the markets.

i don't think there is an easy answer. i just hope the people in charge make the right decisions so this doesn't happen again.

it will be interesting to hear some other views on the subject.

Jock said...

What she said.

I agree the strong will survive or find a way to survive. The government bailed out Chrysler once and look where they are at today, right back where they were a few years ago. I hope the government doesn't bail them out this time.

I don't like government bailouts but I think in this case we need it. If you let Fannie Mae and Fannie Mac falter I think it will have a devastating impact on our economy. Let's not forget about AIG either. AIG is one of the largest corporations in the entire world. If you let AIG falter it will have a world wide impact on every countries economy. I don't think we should be the only one bailing out AIG.

I blame the banking industry for most of this mess. They were willing to loan out money hand over fist to many people who don't deserve loans. The loan originators are the people who got rich during this time because every time they write a loan they get a commission. They don't care if they write a loan to people who can't pay because they already made their money just by writing a loan.

When people can get money so easily they will buy houses above what they can afford. Now with all these people in the market for a house it drives up the housing prices until the prices are so high when something like this does happen they default on the loans because they soon discover the house isn't worth what they owe on it. If money wasn't so easily available this wouldn't happen.

The government is to blame too. They are the ones who told the mortgage companies they can't discriminate against low income families and must make loans available to them too. Thank you Jimmy Carter.

Will we survive regardless of the bailouts? Probably, after all we did survive the savings and loan mess back in the early '80s.

carriegel said...

we will survive in the long term but it is going to be painful in the short term.

you can thank bill clinton too.

curlz said...

what they said. had the discussion at work. kind of dangerous. i haven't bought many homes in my life but the lending institutions were always willing to give us more than we wanted. what a mess!

Jock said...

There was a time where banks wouldn't lend you money if your debt to income ratio was over 25%. Then it moved up to 32-33% and now I think it is around 40%. They need to get this back down to 25%.

curlz said...

People also have a responsibility to keep their debt to income ratio in line too. I can't totally blame LI's.