The Origins of the Bank Bailout Part 2

By
Real Estate Sales Representative with Keller Williams

A customer of mine, Jeff Fisher, sent the following comment on my article Bank Bailout Part 1 at

The Origins of the Bank Bailout

 Jerry Rolling wrote:

> ** Whose Fault is it? **

> 1. Wall Street and Fannie and Freddie...

And now one of their principals is Obama's finance adviser and on the short list to become sec of treasury with the power granted by the so-called bailout.

> 6. Congress. Too much attention to minor issues. Too easily

> distracted by Lobbyists.

You haven't given Congress enough blame. Some of Fannie/Freddie's mistakes were driven by acts and oversight of Congress. HUD regs were rewritten in 2003-04. Bush's chief banking examiner warned of problems at that time and was threatened with impeachment. Read up on the Community Reinvestment Act and how it was finally given teeth.

> ** Is the Bailout the right thing to do? **

> After the 1929 market crash it took the US three years to act.

That's not true. Hoover (and the republican Congress) intervened in several damaging ways, parlaying a Fed-induced monetary crisis into a full-fledged depression.

> The Smoot Hartley Act placed tariffs on 21,000 imported items.

> International trade, imports and exports, plummeted.

That was Smoot-Hawley, and it was early 1930 keeping Hoover's campaign promise to farmers.

> When Franklin Roosevelt was elected he acted decisively. While it was

> slow - much damage had been done - the economy recovered.

You make it seem as if there was cause and effect here, but the opposite is true. The depression worsened until the supreme court (still loaded with evil republican appointees) killed off the NIRA and the rest of the first New Deal in late 1935. *Then* the economy started to recover.

Sadly, FDR took the credit and won re-election in 1936. The consequence was the second New Deal of 1937, which caused a depression within a depression in 1938, taking the economy to lower lows than Hoovers ever had. The congressional Dems suffered in 1938's mid-term elections. Much of the New Deal was abandoned in 1939.

That and WWII armaments spending by Europe is what finally lifted the US out of the Depression, so *please*, don't ever give credit to Franklin Dictator Roosevelt.

> $700 billion is cheaper than 25% unemployment in my opinion.

While I agree that some relief can soften the impact of this crisis, Congress did it wrong:

* FedGov should NOT buy mortgage bundles.

* FedGov should NOT buy into banks.

* FedGov should NOT give or lend money to weak and foolish management.

* FedGov should NOT reward home buyers for over-paying for their houses.

* FedGov should NOT load another $150 Bn of non-sequitur pork and ear marks onto a crisis-powered "bailout".

* FedGov SHOULD lend money to good management so it can buy out (at a

discount) the bad. The bad management would be replaced by good. The money would be repaid with interest.

* FedGov SHOULD repeal the CRA, all of its associated regulations, and all similar pie-in-the-sky free-lunch legislation.

The bailout as passed is throwing good money after bad without even solving the underlying problem. Some symptoms may be delayed until after the election, but root causes continue unabated.

Sadly, neither party's politicians has the integrity or backbone to solve the problem. I hate it when *I* would make a better president than either party's nominee.

Cheers,

-- Jeff Fisher ><> Vancouver WA

http://jeffryfisher.net/Statesman

"The most local level of government is the individual citizen."

 

Read Michelle Singletary's October 17th 2008 article at http://projects.washingtonpost.com/staff/articles/michelle+singletary/ for more complete information on the CRA. 

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Rainmaker
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Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

What amazes me about all these bailouts is that Wall Street isn't acting as favorably as one might expect.  They are down 231 points again today.  I realize all this was supposed to take time, but I understand that banks are once again beginning to at least lend to one another.  I would have thought that the mere anticipation of money flowing once again would have been positive.  The market is acting very schizophrenic.

 

 

Oct 21, 2008 06:30 PM #1
Rainer
35,606
Jane Page Thompson
Aiken Properties - Aiken, SC

Jerry, I think you have some good information here and only wish others would catch on.  I did a post a few weeks ago with FDR references and only a few people even looked.  Thanks!

Oct 21, 2008 09:33 PM #2
Rainer
6,755
Jerry Rolling
Keller Williams - Vancouver, WA
CRS GRI ABR Realtor Vancouver WA

Myrl,

I felt I took on too big a project trying to explain thebank bailout.

 I'm certainly not going to comment on Wall Street pricing!

I'm so sad that the responsible bankers and institutions who have built effective financial tools for the betterment of us all over the past 75 years are in peril of having their work destroyed by a few fraudulent criminals initiating a tidal wave of short sighted greed by bank officers who ignored the lessons of history.

 

Jerry 

Oct 21, 2008 09:41 PM #3
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Rainer
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Jerry Rolling

CRS GRI ABR Realtor Vancouver WA
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