Opinions on the Stimulus Bill

[ResAlien]

I'm just happy because I've now nicknamed part of myself my "Stimulus Package". Thanks Obama.

[PIMking]

Originally Posted by ResAlien

I'm just happy because I've now nicknamed part of myself my "Stimulus Package". Thanks Obama.

You can name it that because it might end up being bad but as long as the guy pushing it thinks its good everything is okay!

[llama64]

Originally Posted by Azure

I don't have any faith that the government will fix anything, much less the 'banks.'

Who else is there at this point? Do we trust in some "invisible hand" to show up and provide some sort of corrective force?

[Azure]

Originally Posted by llama64

Who else is there at this point? Do we trust in some "invisible hand" to show up and provide some sort of corrective force?

Part of the problem was too much government intrusion in the first place.

There are lots of smaller banks that are doing just fine in the United States, and around the world. Maybe the larger banks should start taking notice.

[llama64]

Originally Posted by Azure

Part of the problem was too much government intrusion in the first place.

There are lots of smaller banks that are doing just fine in the United States, and around the world. Maybe the larger banks should start taking notice.

What government intrusion are you talking about?

Everything I've read about the lead-up to this whole problem was that the Federal Reserve backed off on their regulations or followed a very limited role due to the ineptitude of Alan Greenspan. They freed the banks from having to carry acceptable capital to debt ratios and started allowing high risk speculative investing to be made by the banks using people's stored money. And when that went south, as all markets inevitably do, people lost their homes due to a few greedy bankers.

The mortgages should never have been granted, and in a properly regulated world, they wouldn't have. The lack of regulation directly led to one of the major causes of this downturn. There is far more to it then this I know, but at least I'm providing an example.

[Rathji]

Didn't the government cause the subprime crisis by forcing the banks to offer them? I know this is an over simplification but still.

[peter12]

Originally Posted by llama64

What government intrusion are you talking about?

Everything I've read about the lead-up to this whole problem was that the Federal Reserve backed off on their regulations or followed a very limited role due to the ineptitude of Alan Greenspan. They freed the banks from having to carry acceptable capital to debt ratios and started allowing high risk speculative investing to be made by the banks using people's stored money. And when that went south, as all markets inevitably do, people lost their homes due to a few greedy bankers.

The mortgages should never have been granted, and in a properly regulated world, they wouldn't have. The lack of regulation directly led to one of the major causes of this downturn. There is far more to it then this I know, but at least I'm providing an example.

Fannie and Freddie Mac.

[llama64]

Originally Posted by Rathji

Didn't the government cause the subprime crisis by forcing the banks to offer them? I know this is an over simplification but still.

That was part of it, for sure.

The government was pressured to repealing the Glass-Steagall act - a measure that was designed to separate commercial banks (lenders) from investment banks (bond/equity sales). This led to commercial banks acting like high risk investment banks, routinely growing more and more ballzy every year until the point where they were carrying a 30:1 debt to capital ratio. Prior to this commercial banks were forbidden from such a high ratio.

The repeal was lobbyed for by the banking industry (who blew an estimated 300 million on that campaign) because they wanted more flexibility in pursuit of high returns on investment. Basically, greed overshadowed good sense and we are now stuck cleaning up the mess. The Federal Reserve had plenty of time and power to put a stop to this situation.

[badnarik]

Originally Posted by llama64

Who else is there at this point? Do we trust in some "invisible hand" to show up and provide some sort of corrective force?

Failure would be the corrective force.

[llama64]

Originally Posted by badnarik

Failure would be the corrective force.

I don't necessarily disagree with you. Watching the "Big 3" get massive bail outs for effectively driving their companies into the ground is painful.

But when it comes to the banking industry, I think regulation needs to be heavily looked at and correctly applied. Free reigns for banks seems to only lead to disaster. Throwing money at the economy isn't going to fix anything unless the rules are re-written.

[peter12]

Originally Posted by llama64

I don't necessarily disagree with you. Watching the "Big 3" get massive bail outs for effectively driving their companies into the ground is painful.

But when it comes to the banking industry, I think regulation needs to be heavily looked at and correctly applied. Free reigns for banks seems to only lead to disaster. Throwing money at the economy isn't going to fix anything unless the rules are re-written.

Maybe. There was an article in the Economist this month that mentioned that a lot of the small, independently run banks are making it through this tough time quite easily.

It's probably more of the corporate mentality and the resistance to reform that can be blamed for the private sector's responsibility. I don't think free market systems had anything to do with this disaster.

[Rathji]

Originally Posted by peter12

Maybe. There was an article in the Economist this month that mentioned that a lot of the small, independently run banks are making it through this tough time quite easily.

It's probably more of the corporate mentality and the resistance to reform that can be blamed for the private sector's responsibility. I don't think free market systems had anything to do with this disaster.

I agree 100%.

Very hard to change a system that gets fatter and has less need to be responsible as the markets drive upwards. This is why I am not in agreement with the automakers bailout in principle, but I don't see not bailing them out as having much better results.

[Azure]

Originally Posted by llama64

What government intrusion are you talking about?

The intrusion that the smaller banks never had to deal with. Hence the reason why they're doing just fine.

Fannie and Freddie Mac.

[peter12]

Originally Posted by Azure

The intrusion that the smaller banks never had to deal with. Hence the reason why they're doing just fine.

Fannie and Freddie Mac.

I do think that Wall Street showed some startlingly poor judgement in their loaning practices and processes. If they wanted to get around the mortgage regulations, they could have done it, instead they were happy to loan money to anyone and anybody who wanted to own a house.

Greedy ba$tards.

[Azure]

Originally Posted by peter12

I do think that Wall Street showed some startlingly poor judgement in their loaning practices and processes. If they wanted to get around the mortgage regulations, they could have done it, instead they were happy to loan money to anyone and anybody who wanted to own a house.

Greedy ba$tards.

Yes, that was also part of the problem.

[peter12]

The problem isn't capitalism or the free markets though. Honestly, the reason why these institutions are dominant is probably because they are the economic/choice systems that are the best at managing complex and large societies. Judging from what we see in nature, the reciprocity involved probably corresponds to our deepest instincts of social cooperation.

No, the problem is greed and entitlement that has become central to our lending system. It's the average individual's fault for thinking he "deserves" a certain type of lifestyle that neither he nor the economy can afford. Consumption levels need to go down and we need to get more in touch with the true costs of the products we purchase.

[Thunderball]

Originally Posted by peter12

The problem isn't capitalism or the free markets though. Honestly, the reason why these institutions are dominant is probably because they are the economic/choice systems that are the best at managing complex and large societies. Judging from what we see in nature, the reciprocity involved probably corresponds to our deepest instincts of social cooperation.

No, the problem is greed and entitlement that has become central to our lending system. It's the average individual's fault for thinking he "deserves" a certain type of lifestyle that neither he nor the economy can afford. Consumption levels need to go down and we need to get more in touch with the true costs of the products we purchase.

I think this is the big one. Entitlement.

Entitlement is what crippled the auto industry. Entitlement is what forced governments into enacting dangerous banking and loan legislations. Entitlement is what got into people's heads when they wanted a house, two cottages, three cars and a boat, with a median salary.

The banks saw a way to increase their market share, so they went along with it, hoping it wouldn't backfire.

I think people need to come to grips with the reality of the situation. We screwed up, and it hurts. However, this isn't 1929. Not even close. Realistically, we are facing a mean recession, but not a depression. Things will improve reasonably soon so long as people/governments don't do anything overly stupid (Smoot-Hawley Act type things, or total retreat on consumption). In some regimes, the media would be dragged out and shot for the sensationalist press that is making the situation worse.

[peter12]

Originally Posted by Thunderball

I think this is the big one. Entitlement.

Entitlement is what crippled the auto industry. Entitlement is what forced governments into enacting dangerous banking and loan legislations. Entitlement is what got into people's heads when they wanted a house, two cottages, three cars and a boat, with a median salary.

The banks saw a way to increase their market share, so they went along with it, hoping it wouldn't backfire.

I think people need to come to grips with the reality of the situation. We screwed up, and it hurts. However, this isn't 1929. Not even close. Realistically, we are facing a mean recession, but not a depression. Things will improve reasonably soon so long as people/governments don't do anything overly stupid (Smoot-Hawley Act type things, or total retreat on consumption). In some regimes, the media would be dragged out and shot for the sensationalist press that is making the situation worse.

In the end, it's actually governments' fault for subsidising the money-making industries with the most political clout and shielding us, as consumers, from the true cost of products.

Cars, oil, food all have a tremendous cost involved, yet, we as consumers aren't given the proper incentives to choose the most efficient producer.

I'm a bit of a downer on big street capitalism these days, but I still point my accusing finger primarily at government.

[Thunderball]

Originally Posted by peter12

In the end, it's actually governments' fault for subsidising the money-making industries with the most political clout and shielding us, as consumers, from the true cost of products.

Cars, oil, food all have a tremendous cost involved, yet, we as consumers aren't given the proper incentives to choose the most efficient producer.

I'm a bit of a downer on big street capitalism these days, but I still point my accusing finger primarily at government.

Of course, the people elect governments. If one party won't contribute to publicly desired entitlement, another will, and get a landslide victory.

[peter12]

Originally Posted by Thunderball

Of course, the people elect governments. If one party won't contribute to publicly desired entitlement, another will, and get a landslide victory.

Bottom Line: We're screwed.