It rankles me that many of the elitist from Wall Street and Washington seem to think that they are much wiser and more sophisticated than all us yokels west of the Hudson and the Potomac. First the folks in Washington lay all the groundwork for this financial disaster by encourgaging and even mandating the very loan procedures that caused these problems i.e., the affordable housing agenda of some that put people into homes with bad credit and no money down and the protecting of Fannie and Freddie. Barney Frank and Chris Dodd were their two best friends in Washington. Then the Wall Street types get even more creative than Michael Millken and add more bells and whistles to every mortgage transaction because with each layer of paperwork there were more fees to be earned. Lastly, there are the high doom investors not only here in the US but around the world who committed the oldest mistake when it comes to investing in real estate–they bought without “seeing” the dirt. In this case it was buying without taking a look at the mortgages and the dirt and buyers behind the mortgages. All the while planning on making a much higher than normal return on their money. The higher the return the greater the risk, that is a truism of investing since Biblical days.
Then this same cabal of folks tell us exactly how to fix everything. About 95% of us have been paying our mortgage on time, we could afford it and probably made some other sacrifices along the way to get that house we wanted so badly. Most of us even had to come up with down payment money and pay all the closing costs also. I frankly don’t have a lot of sympathy at all for those who bought a house they could not afford and defaulted. Some may not have understood what they were signing, but if they are really that dumb they would have figured out another way to mess things up anyway and the mortgage would probably have gone into default. But if you feel for them we could help out just that five per cent. It galls me to even consider that. No one helped me with my payments and no one is helping out you. Other than stupidity what quality do those folks have that warrants our help? What makes them worthy of special consideration. Do I really care about the investors in China or Indonesia who bought these weird investments? Those Wall Street types were rolling in the dough and flaunting it when the money machine was still working and the politicians were obviously happy with everything. The blame is broad enough to cover both parties. There are no innocents in this mess.
Now these bright people tell us we “don’t understand” and that this is just what we need. Again the blame for the mess of a bailout bill cuts across all lines. We can do many things that cost either nothing or far less than is being proposed. If some version of this bailout does pass then both candidates need to be pressed hard to answer the question if they will follow its dictates or will seek adjustments and amendments as soon as they are elected. I don’t trust Reid or Pelosi. They know damn well that whatever they pass can be changed come next spring if their guy wins. There will be no oversight then. That scares me. Who checks on and overlooks the work of Reid and Pelosi? The people are overwhelming against this measure and for good reason. The only oversight we have is with the ballot. With such strong opposition in hte heartland they should have realized this approach would crater. All those very smart people in Washington and on Wall Street got us here in the first place. They forget that some of us can remember that less is usually more. You have all heard the adage of KISS–keep it simple stupid! Yes, and it normally is very good advice even in complex situations, perhaps truer then than any other time in fact.
Change the mark to market rule. That will save many of the banks right there and is more “real world” anyway than an artificial accounting rule. We can think Sarbanes-Oxley for that. Again the results of unintended consequences and regulation–yes that is a SEC regulation accounting requirement. Take the 5% of bad loans and place them in a pool. Have the Government, not buy but guarantee a large portion of the loans. Go through the loans one by one and the debtors who can’t pay should be foreclosed. Others that can pay a significant amount with adjustments can get a new loan. Sell these new loans into the private market place. This would cost less than the Government spent to bail out AIG. We would even get a return of a goodly portion of our money and more quickly than under the current proposal. All those holding crazy mortgaged backed securities will either get paid or not depending on the underlying mortgages just like the original deal they made. If they make money fine, if they lose money then so be it. Focus on just the houses and the bad mortgages. It is all those mendacious security instruments that are causing the heartburn on Wall Street. Send them a truck load of Tums.
I am certainly open to other suggestions and I have no doubt there are even better ones out there. Like simply having the FDIC and SIPC increase significantly their insurance coverage for deposits and Brokerage accounts. That would sure calm down the markets a lot at home and wouldn’t cost a dime up front.
I do hope those pin stripes and politicos will stop looking down their noses at the ordinary folks. Trust the people. I always trust the people more than the Government anyday. I know we argue and disagree and espouse weird ideas at times but we do reach a loose consensus and that consensus here is don’t do a bailout. Rather than us listening to them maybe they should try listening to us.