In 2002, I bought a condo well below what I could “afford” because I knew that if the market hit a downturn I wouldn’t get any help from the government. I guess I was wrong and I should have bought that $300K house anyway.
I didn’t invest in Fannie Mae and Freddie Mac bonds because the paltry .5% return advantage wouldn’t pay for putting all eggs into one basket and the risk from overvalued real estate coming crashing down, but apparently I shoulld have because there’s no real danger. (The Fed is now Steve Erwin?)
I also apparently should have started up a huge insurance business and failed. No. I should have REALLY failed, because apparently our government is rewarding people for really really failing. (Just moderately failing, you’re on your own.) EPIC BAIL!
The government is also planning on purchasing failing home loans, further rewarding stupid banks. Did they reward stupid dotcoms? If I knew they would come to my rescue, as a programmer I certainly would have quit my steady job in government contracting to reap huge rewards in the dotcoms with NO RISK!
I might be wrong on this last one, but judging from the returns on my Money Market Mutual fund with Vanguard (a paltry 2%,) I don’t believe they were investing in AIG or short term subprime loans. But apparently, I should have really been investing in the ones that are returning 4% or higher, because if you fall below $1 a share, the Fed will bail them out anyway!
I’m a fiscal moderate and if you want to elect European Socialists then please let’s do so and see what happens. But this IS socialism without elections.
I feel your pain, man. Well, actually, I don’t, because I’ve never borrowed money, except to buy a car, and I have exactly $0 invested.
I do, however, agree that it’s ridiculous that the government needs to bail out industry.
I have a differenct problem with it, though- mine is simply that the government is expected to do this stuff but industry is expected to do nothing in return. If we’re bailing out AIG, it shouldn’t just be a bailout; the taxpayers are effectively injecting capital in order to keep the company afloat. When private investors do that, they get stock. Why is it that when the rank and file do it, they get shafted?
If the government owned interest in major financials it would act as a big woolly blanket thrown over the economy; sure, growth would slow down a bit, but we wouldn’t have shit like this every eight years.
Well, at least with AIG, the point of the bridge loan is to pay it back over a period of two years by selling its assets off. It’s supposed to die, but just in an orderly way.
In order to not disrupt financial markets by flooding the market with trillions of dollars of debt at the same time. If AIG really does recover the Government will actually stand to benefit from it since it will have %80 of the capital but I doubt that it will since it’s going to be government run.
But government owning the means of production is apparently okay as long as the execs get their golden showers.
The Fannie Mae and Freddie Mac problems appear to be to have been encouraged by the government. At any time, the Government could have stepped in and slowed down the bad loans but instead it appear it encourage Fannie Mae and Freddie Mac to keep giving out loans to first time buyers with well under 20% down and worse yet, less than even 10% down. The government encouraged this balloon to build and there were warnings out there for years about the dangers.
Don’t even get me started on ARM/Balloon loans.
AIG is not failing as an insurance company but as a investment company that is not regulated as well as it should be. Apparently as an insurance company it did not need to meet the same regulations as a bank. Our government has really let the ball drop on regulation of the markets and loans.
Once again the key concept to focus on here is ‘hypocrisy’. The party of fiscal responsibility and deregulation that deplores giving money or help to failures (e.g. any socially responsible programs such as, say, education), is tripping over themselves to bail out yet another giant (private, no less) corporation driven into the ground by greedy, incompetent, yet ridiculously overpaid administrators and executives. They don’t want you to point fingers when something goes horribly wrong, saying “playing the blame game won’t fix the problem”. And they whine “oh, but if we don’t bail them out, the whole system will collapse and there’ll be anarchy - oh noes!!!”. But the fact of the matter is that if there were proper oversights in operation, we wouldn’t be in this mess in the first place.
Nobody ever fucking learns. History will teach us nothing.
And now they’re ‘temporarily’ clamping down on short sales. According to the NY Times, ‘Regulators have long thought that the practice was crucial for efficient markets to function’.
I don’t get that… I don’t understand how it was ever ok to sell shares you didn’t own, speculating that you could buy them later at a lower price for a net gain. I’m not knowledgeable enough about financing or stocks (which I’m trying to change). I admit that. Can someone possibly explain how anyone (other than the folks betting on failure and possibly spreading premature rumors of a company demise to encourage that failure) could have thought that was a good idea?
Being a fiscally responsible sort myself, I’m not crazy about what the government is doing either. However, from what I gather, the worry is that if the big financial institutions continue to fail without government protection, we could be headed towards an economic disaster bigger than the Great Depression.
Because they increase the activity in the markets, for one, and it gives alternative options for people who want to bet against certain stocks. Under normal circumstances, there’s no way to “win” from a down market. Shorting lets you do just that, if your smart enough. it is very difficult to do properly, however, and risk is theoretically unlimited.
What’re you, some sort of socialist? In a rough and tumble free market economy, only the losses are socialized. Profits go to whomever had the moxie to take a risk-free risk with someone else’s money.
You know, I spoke to the uppity-ups at Countrywide about the negatives of subprime lending when I worked there for a short time a few years ago. I actually spoke with Angelo Mozillo about it (among other problems I had, many of which were more personal to me.) I told them that giving out loans to people who don’t generally qualify for loans under the assumption that in 2 years they will be earning significantly more money and will be able to pay at that point was stupid and dangerous and would end in lots of foreclosures. They told me, “No, we are offering the American Dream to families who otherwise couldn’t afford it! We are doing a good thing!” Telling them that the American Dream doesn’t include living in your sister’s garage after your house is taken away fell on deaf ears. I wish they had listened to me.
Short sellers are the brakes on the engine. Without a downward pressure, stock prices would keep escalating (until they crashed). In order to find a true price, you need forces pushing up and down. Also, many times fundamental problems with companies are discovered by shorters. While stock hypers and longs may overlook (or hide) things to make the company seem better than it is, shorters seek to find reasons why the stock is overvalued.
Obviously, abuse and fraud can and do occur (as they can with stock hypers), but overall they do serve a purpose.
