Bail Out?

I am not a financial analyst, nor do I claim to fully understand what is happening in our financial markets, but I do have a few observations.

1.  Using the mortgage market as a social experiment was a really bad idea.  People with bad credit and limited income are not good credit risks to buy $600,000 homes.  Banks were forced to give these loans by a Congress who threatened them with not being able to expand if they did not give out a certain amount of subprime mortgages.  This mistake was aggravated by the fact that the local banks were not holding the paper on the loans that they were forced to make–they did not have to carry any risk for the loans they made.  The problem in this case was not a lack of regulation–it was an abundance of bad regulation.

2.  I am not in favor of having the government regulate salaries or bonuses of corporate executives, but I am forced to admit there have been abuses in this area.  Is there any way a law can be passed to say that when a corporate head receives a bonus, an amount equal to half of his bonus has to shared proportionally among all employees?  I would also like to see an investigation into the multiple million dollar bonuses paid to officers of Fannie Mae and Freddie Mac and some of the other players who were cooking their books during the time this crisis was developing.  I would like to see some of this money paid back in the cases where the government (that’s us–the taxpayers) has taken over the debt of these companies.

3.  We are back to “follow the money”.  The Senators and Representatives who have taken the most money from Freddie Mac and Fannie Mae have been the ones blocking any control on these entities since 1999.  The only way to clean up this aspect of the problem is to look at the list of who received the most money and voted against proper controls of these institutions and vote them out of office.  Throw the bums out!!  I am not objecting to campaign contributions, but when contributions align with votes that actually harm the people who are supposedly represented, it it time to get new representatives.

4.  One of the underlying causes of this problem is the psychology of ‘instant gratification’ that permeates this society.  We teach our children not to wait until marriage to have sex (if it feels good, do it!), and we raise our children with an expectation of having the standard of living right after graduating from school that it took their parents thirty or forty years to earn.  The concept of waiting for something or achieving something over a period of time has been lost in our culture.  The microwave is not evil–but we have become a culturally and financially microwaved society.  I believe that is also part of this crisis.

5.  This is not an original thought, but I have no idea who said it–Democracy is designed to be a three-legged stool–the government, the financial sector, and societal morality.  I think we are missing one leg of the stool.