1) Free Market Economy - no, idiot, it is a regulated economy (particularly in banking where regulations are legion). What we have, is a failure of regulation (read: Bush) that allowed Feddie and Fannie to get involved in so many loans that were fundamentally flawed exceeding its public/private mandate. 2) All the stockholders of Freddie and Fannie have lost all their money--Period. They are not being bailed out. It is the bondholders who are being bailed out and the company is being re-floated. If the bondholders do not get bailed out, the issue is that the bond market will put a premium on future mortgages that will increase the cost of borrowing for the future. This will cause a further weakening of the housing market (thus create more foreclosures and failed mortgages) and significantly damage the banking sector. Thus we would have had a destroyed housing sector, millions of Americans in deep financial difficulty and a damaged or destroyed banking sector. This is not a rosy picture.
Don here can pay more taxes (but, don't worry Bush and McCain wouldn't raise the taxes to pay the bill anyway--so he can just have the inflation he wants) or go through a depression, his choice. Whether he is right or not about letting this unfree "free" market do its thing, the issue is that we have only one life to live and most of us prefer not to do so in a deep multi-year depression.
This action protects the lending markets so they can lend more. Bottom line it is a bailout to keep most people indebted to someone. Being in debt is the American, err, sorry, Chinese way. Most of our paper is owned by China and they have to be repaid. Should have let them go under. That is the free market in it's glory. The constitution does not guarantee home ownership.
3 comments:
Not quite. What Don here forgets is:
1) Free Market Economy - no, idiot, it is a regulated economy (particularly in banking where regulations are legion). What we have, is a failure of regulation (read: Bush) that allowed Feddie and Fannie to get involved in so many loans that were fundamentally flawed exceeding its public/private mandate.
2) All the stockholders of Freddie and Fannie have lost all their money--Period. They are not being bailed out. It is the bondholders who are being bailed out and the company is being re-floated. If the bondholders do not get bailed out, the issue is that the bond market will put a premium on future mortgages that will increase the cost of borrowing for the future. This will cause a further weakening of the housing market (thus create more foreclosures and failed mortgages) and significantly damage the banking sector. Thus we would have had a destroyed housing sector, millions of Americans in deep financial difficulty and a damaged or destroyed banking sector. This is not a rosy picture.
Don here can pay more taxes (but, don't worry Bush and McCain wouldn't raise the taxes to pay the bill anyway--so he can just have the inflation he wants) or go through a depression, his choice. Whether he is right or not about letting this unfree "free" market do its thing, the issue is that we have only one life to live and most of us prefer not to do so in a deep multi-year depression.
100% correct, sirs.
This action protects the lending markets so they can lend more. Bottom line it is a bailout to keep most people indebted to someone. Being in debt is the American, err, sorry, Chinese way. Most of our paper is owned by China and they have to be repaid. Should have let them go under. That is the free market in it's glory. The constitution does not guarantee home ownership.
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