Quick Hit: Welfare Kings At It Again
Terri Whitehouse March 12th, 2008
Dean Baker has an excellent commentary about the recent bailout of financial services companies, and the media’s lack of reporting on it, at The American Prospect:
There is one other issue that is extremely important that has been completely omitted from the media’s discussion of the Fed’s actions. There are people who have shorted the counterfeit notes (mortgage backed securities and related assets) because they recognized that these assets were in fact going to lose much of their value. While these short sellers were trying to make money, they were actually performing a valuable public service. They were pushing down the price of these assets towards their true level. If we had many such short sellers in the market we would not have seen the housing bubble grow to such dangerous proportions. The same holds true of the stock bubble.
However, if the Fed acts to sustain bubbles even after they have started to collapse under the pressure of their own weight, it makes it far more risky for short sellers. This means that even investors who realize that Citigroup has nothing but counterfeit currency will be reluctant to short its stock or other assets supported by counterfeit currency. As a result we can expect to see even bigger more dangerous bubbles in the future.
This is not a pretty story and there are economists who can make this point. The media should be talking to them, not just the cheerleaders for the housing bubble.
When it comes to personal responsibility, the rich need not apply. Go read the whole thing here.
- Bailouts , Daddy State , Economy , Recession 2008
- Comments(7)
As a conservative I am disgusted by any plan to bail out these so called financial institutions that were greedy enough to loan money to people they knew couldn’t repay the loan. I’d say let the loan approvers be tossed out on the butt the same way the people who took a loan they knew they couldn’t afford were tossed out of the house they temporarily owned. The banks took a gamble, they lost. Let’s teach gamblers that once they lose they’re out of the game.
Now someone tell me why the heck it’s the government’s fault that people took sub-prime and A.R.M. loans when they knew they couldn’t afford them once the rates went up.
This whole SIV/alt A/ sub prime real estate disaster has its roots in Clinton
canceling the Glass Stegal Act from the 1930s. The big banks and investment banking houses were turned loose. The US govt entities that should have prevented this, like the Comptroller of the Currency, the US Treasury Dept and the SEC, all controlled by Repubbies, did not do their jobs. Heck of a job, Mitchie!!
you’ve heard the old saying it “the economy stupid” I guess all you Repub don’t think poor people should have the American dream,if it wasn’t for all the low wages lost jobs and interest rates going through the roof, we wouldn’t be in this mess.
I guess your going to blame all this bank bail out on the DEM’S too
I am no Repubbie!! I said that the oversight entities, like the Comptroller of the Currency, etc were all under Republican control in 2001-2007 when this disaster really got cranked up. NO government oversight!! by the Repubbies!! Still, the repeal of the Glass Stegal act opened the door to this sub prime scam.
Who is blaming the government, Herodotus? You start with the presumption that greedy would-be homeowners entered into financial contracts knowing full well they’d be impossible to repay, but that’s not the truth. If you begin with an untrue, overly-simplistic premise, then it’s only natural that you come to an untrue, overly-simplistic conclusion, that doesn’t mirror the reality of the situation. Cases of fraud by deregulated lending institutions are well-documented.
That, taken in conjunction with the skyrocketing costs of health care, increases in unemployment, rising prices of household items and groceries, and gas, and someone who well could afford a mortgage two years ago may be unable to now. In hindsight, it’s easy to say “Well, stupids, you should’ve known better,” but when mortgage bankers lie, and when the media dutifully repeats politicians’ talking point of, “Everything is just fine,” I find that finger-pointing to be nothing I want to participate in.
I’m glad I have an awesome landlord, otherwise I very well might’ve been in the same boat as so many working Americans are in today. I’m also glad my parents were homeowners. Believe it or not, but not everyone has the social capital that aids in such decision-making processes and creates a financial safety net when things come crashing down.
GOP mantra “it’s Bill Clintons fault”
BULLSHIT!
“NO government oversight!! by the Repubbies!! Still, the repeal of the Glass Stegal act opened the door to this sub prime scam.”
1999: The Gramm-Leach-Bliley act repealed the Glass-Steagall Act of 1933. One of the effects of the repeal is it allowed commercial & investment banks to consolidate.
William Philip “Phil” Gramm REPUBLICAN Senator from Texas (1985–2002).
James Albert Smith “Jim” Leach REPUBLICAN member of the United States House of Representatives.