I can’t believe this is happening. I am literally watching democracy fail at a time of critical need. What’s tragic is I’m seeing people act against their own interests, when they think they’re defending them.
I’ve been listening to Wall Street analysts for a couple weeks now. They have all said that we are facing something big (as in “really bad”) in a few months if the federal government does not act immediately to enact a rescue plan. Cramer on CNBC has used the term “depression” several times to describe what’s coming if the plan is not enacted. He’s also said there will come a point in time where the rescue plan won’t make a difference. It needs to be enacted before that point, or it will be for naught. Time is of the essence. The 700-point drop in the stock market we saw yesterday is a sign that the window of opportunity is closing. The very legitimacy of our market is at stake. Foreign investment is a huge part of our economy. If faith is lost in our market, that money will flee this country, and interest rates will rise.
The above paragraph is immediately going to turn most readers off, because they think I’m falling for snake oil. I’ve heard it from some of my friends: “This is the Wall Street cronies who caused this mess trying to fool you into recovering their losses for them!” I’ve even heard it compared to how we got into the Iraq war. Here’s the thing though. Even if it’s true that cronies will benefit, if the rescue package is not enacted we are going to be facing the prospect of millions of people losing their jobs, on top of the jobs we’ve already lost this year, businesses collapsing in droves because they can’t borrow money to even make payroll, and it’s going to become much more difficult for people and businesses to borrow money. In other words, it’s going to hurt us a lot.
If your credit history is less than stellar, you can forget about getting a car loan, or a mortgage, or a student loan. If you or your parents can’t afford the tuition, sorry. You won’t be able to get an education. Maybe the government will get back into the student loan business. In my opinion that wouldn’t be so bad, actually.
Get used to having a hard time finding a job, any job. Get used to renting (if you have a job that will pay it) and riding the bus, or putting up with your old car (if you’re going to be able to afford gas). In all likelihood you won’t be able to buy any of these items even if you manage to hold on to a job, unless you can pay for them in cash outright. Or hey, ride a bike. It’ll save the planet! (shudder)
I am incredulous that the public is totally misreading the situation, and what’s tragic is their misperception could come back to bite them REAL HARD!
To allay the fears of the suspicious, I do not work for a bank. I do not work for the government, and I’ve never worked on Wall Street. I am saying the following based on what I have learned about this issue from experts in the field.
It’s time for a little financial education. What happened as a result of the financial meltdown caused by Fannie Mae and Freddie Mac is that the credit markets have seized up. Today, you cannot get a car loan, a mortgage, or a student loan without perfect credit. Even then you may not be able to get one. The reason being that banks do not know whether other banks are holding on to bad mortgage bonds that are acting like ticking time bombs. So they are lending money to each other at high interest rates, or they have stopped lending altogether. Therefor, it’s difficult for you to get credit for high ticket items right now.
Our economy runs on credit. Most of our currency is based on credit (in the form of government treasuries). The only reason we have money in the economy at all is that banks have lent it out. That’s the truth. It’s been true since the 1970s when we got off of the gold standard. If banks don’t lend, the economy will collapse get smaller by attrition as people who can pay off their debts return money to the banks. The Fed is propping up a select number of major banks and major corporations with credit to restore liquidity in those institutions. While they are important to the functioning of the economy, these measures alone will not sustain it. The reason being that a large portion of the economy is small business. The Fed isn’t helping them out, are they. No, small business depends on banks–the ones that are being very tight with their lending.
Just to set the record straight, please, PLEASE, PLEASE LISTEN! The goal of the rescue package that was voted down by the House yesterday is to BUY the bad mortgage bonds from the banks that currently own them. This will take these time bombs off of their books, hopefully restore TRUST in the banking system so that credit can flow again, and make it possible for the economy to recover. The economy CANNOT recover with the current state of affairs. This package is aimed at benefitting all of us, not just a few. THIS HAS NOTHING TO DO WITH RECOVERING LOSSES FOR SHYSTERS!
What the government plans to do with the bad bonds is hold on to them until the real estate market recovers, and then sell them at a profit. The idea is the government will make its money back, and then some, with the idea of “benefitting taxpayers”. This type of scheme has worked out well with past bailouts.
The bailouts of Fannie Mae and Freddie Mac happened a few weeks ago. The government took control of AIG two weeks ago. There have been bailouts of other banks earlier via. mergers with healthy banks that the Fed is now protecting at all costs. THIS HAS NOTHING TO DO WITH THEM. They’re doing this for US!
Yes, the government made a very bad mistake promoting bad loans which have created these ticking time bombs. I am angry at them for doing this, but so far as I can see the government is the only one that can clean up its own mess. It’s a matter of resources. For the love of God please understand this! If you do not heed these words I do not want to hear millions say after they have lost their jobs, their homes, their cars, and their families that the government didn’t do enough. The truth is they tried, but you held a gun to their heads telling them to not do the very thing that would have given you a chance to survive this.
I understand that many of you probably are not feeling the effects of this now. What I’m asking you to perceive is a future reality–one we can change. It’s within our grasp if we will not be fooled into thinking this opportunity is a threat.
Please. Don’t believe the lies that are being told about this package. Understand the truth, and tell your congressmen to vote for it. Tell them to quit their dallying and put out the fire before it burns the house down on top of all of us. To tell you the truth I would prefer that they would just pass the 4-page Paulson proposal as-is NOW, and worry about changing the administrative details later. The important thing is to get the process going, to free up credit, and give the economy a chance.