For one of the first times in my life, I am ignoring my principles and acting in pure self-interest. I am in the midst of trying to settle on the sale of my house, I desperately need this closing, and I am afraid the buyer’s loan, with a 10% down payment will not go through. Therefore, although I hate the bill that the Senate passed like poison, hate most of the Christmas tree ornaments that were hung on it, hate the fiscal irresponsibility it represents, I not only called my Congressman and asked him to vote for it, but I called every member of my family and asked them to call their congresscritters and talked to my neighbors and asked them to call our congressman about it. I called the real estate agents and asked them to contact the buyers. Now I’m talking to my friends on the Dope.
It’s not just pure self-interest either. We need to get this done. The bill sucks, no question about it. But are we going to get anything better in time to save anything? I mean, Paul Krugman is willing to suck it up and support it, or at least he was on Countdown last night. He didn’t like it, but he reluctantly said it was better than nothing.
I appreciate your dilemma. My mom needs to sell her place as a new retirement home she is moving in to requires the money from the sale to close. She NEEDS to be in that retirement home…her sunset years all hinge on it since my dad passed away. As you can imagine she is having a helluva time.
That said I think the bailout is shit and not in your or anyone else’s best interests except for Wall Street. There would be credit to be had today except that Wall Street is holding out for the bailout plan. The Fed already injected liquidity into the market…Wall Street however does not want to unload assets for $0.30 on the dollar if the government will give them substantially more. So, they are all sitting on their collective hands and hoping the scare will prompt the bailout to happen (as it seems to be happening for you).
If the government just told them all to fuck off, as they should, I suspect you’d see the credit start to flow and close on your house (assuming the buyer is a good credit risk…bad risks are not popular these days). You’d also likely see a better and cleaner economy and not have the government pilfering your pockets to pay Wall Street.
Here’s the deal. I have nothing. I have used up my savings. My mother, who is living on Social Security and a little bit of savings, has been supporting me for the past three months. If I don’t close, I’ve got nothing to live on, and my Social Security Disability hearing won’t be until the spring, and isn’t a lock even then. I can’t afford to wait it out. There are probably a million, maybe more, other people out there who for some reason or another not only need credit to go through, but need it right now. It’s not good enough if it gets there in a month or a year. I need it now. My closing is scheduled for the 17th. Final mortgage confirmation is the 10th. As far as I know, the buyer is a sound credit risk. But she only has 10% down. What do I do, try to talk my Dad into ponying up another 10%? She can’t afford to pay it back, except amortized over thirty years. I’m 52; I don’t know if I’ll be alive in thirty years, and it would cut my net in half (assuming I paid my Dad back out of my proceeds).
Fair enough but I am not convinced there is a lack of liquidity. Read the linked article. The Fed pumped in $100+ billion in liquidity into the markets not a week ago.
Banks are just sitting on everything for now to get the bailout money. No one will move till it is sorted and they can know where they stand. Thing is, one way or another, bailout or no bailout, the banks will start moving again. They WANT to loan to people. That is how they make money. If your sale is a good one, buyer is a good risk and sale price is not inflated, then someone will want to loan the buyer the money. 10% down is not a bar to this nor unusual (although I am sure they would be happier with 20% down).
So, no bailout I believe would still allow the sale to go through. The real worry is if the bailout fails and Congress sends the message that they will keep lingering over it…Wall Street would remain frozen not knowing what to do over uncertainty of how things would play out. If Congress just told them to piss off then the markets would start moving again as well.
Of course I am not an expert and it is hard to say how any of this will pan out. Even the experts are not sure really. I just think that the bailout will hurt us all in other ways and not fix much of anything that is really wrong with the economy.
The thing that people don’t seem to get is that banks are not like other businesses like the auto makers or whatever. The economy depends on banks to lend money so that other businesses can grow. They depend on banks to hold their investments securely. If people don’t feel like their money is safe with the banks or the banks are unable or unwilling to lend money, there is no growth and the system falls apart. That is why the government serves as the “lender of last resort”. That, in a sense, is what the bailout is about.
I get that just fine. I just do not buy the economic Armageddon that Wall Street is peddling. No bail out will see a lot of them lose money and they are apoplectic over the notion so are doing their best Chicken Little impressions.
It is not as dire as they would have it though. Certainly 166 economists do not agree (see my earlier link) along with numerous other pundits and commentators and some politicians even. Certainly they will lose money…some will go out of business. But the liquidity is there, if tighter in the short term till they unwind a lot of this. Heck…that Bush is pushing this plan is practically all the info required to know this is a freaking bad idea and he is managing once again to plunder the country for his peeps.
In short, the bail out does not look necessary for the credit markets to resume.
I am sorry but if they put the money in to the financial companies it will take a while to trickle down . We have to negotiate to buy the mortgage backed paper. It will take some time . Maybe if it passes they will lighten up in anticipation. We do not even know where they will start. A representative from Calif. was on TV saying he is voting against it again. He said he was told that they will buy back from the Chinese and Saudis. His claim is over half the money is aimed for them.
Money is essentially religious in nature. It is an exercise in belief. You accept $5 or $20 or $100 or $100,000 for something because you believe that you can get that same amount back in goods and services, or in returns on investment. So a bill that promotes confidence may be sufficient.
If the bill doesn’t pass in the House tomorrow (Friday), it won’t stop there. They’ll keep tinkering until they get something. And the creditors will freeze credit until they do. And I and the million plus other people in comparable situations will be completely and utterly screwed over. Maybe if Paulson had never decided to intervene at all, it might have been better, but that was the attitude Hoover took, and it didn’t work out so great then. FDR wasn’t able to fix the Great Depression entirely, but I think he got a lot closer to it than Hoover did, and frankly we could use the infra-structure maintenance.
Many of the money experts who pushed the bailout so hard ,have changed their tunes a bit. Now, we will see very little help for the average American. Now we have to wait a long time before we see any effects,if we do at all. Nearly a trillion dollars gone, gobbled up by the financiers.
Your commentator represents a minority point of view, libertarianism.
Perhaps his analogue can be found in the advice that Mellon gave to Herbert Hoover, “Liquidate, liquidate, liquidate!”
There’s a case to be made for that. But the experience with such a strategy isn’t good.
The consensus among the economists who have blogs that I’ve read seems to be, “Hold your nose and vote for the bill.”
Personally, I don’t think the bill is that bad. I predict that the NBER dating committee will declare that a US recession started on or before September 2008 (possibly as early as 2007). Under such conditions, spending upon pork is a good thing, as it offsets the decline in general demand for goods and services.
I agree that we don’t have a liquidity crisis. And if the problem was a shortage of liquidity, the rescue package would be inappropriate. We have a solvency crisis, and an excess of assets that are risky.
In my view, we have financial institutions that are in need of root and branch reform. But that can come after the election. For the moment, we need to prevent a recession from turning into a deep recession. So I support the rescue package.
