Yesterday the Federal Reserve engineered bailout #5 of 2008; this time for mega-insurer AIG. Despite their earlier assertions that taxpayer money not be used, when push came to shove, the Feds did exactly that. While some will argue that the Federal Reserve doesn’t use taxpayer money, we know otherwise. While the Fed doesn’t collect taxes per se, they control the VALUE of our money. So when they pledge billions to back up the malfeasance of these financial companies, they are using OUR purchasing power to do so.
So far in 2008, the bailout list stands at 5 in addition to the hundreds of billions of dollars already cranked down the rat hole since last year to keep the financial system from imploding. Let’s take a walk down memory lane…
Bear Stearns – 03/16/2008
Fannie Mae – 09/07/2008
Freddie Mac – 09/07/2008
Lehman Brothers - 09/15/2008
AIG – 09/16/2008
Who’s next?
After watching the debate tonight and the bailout last week I’m left thinking that there are 2 socialists running for president. Is anyone as disgusted as me or am I missing something? John McCain thinks the government should pay down loans for people that bought houses they could not afford but what about the rest of us. My home value has gone down also regardless of the fact that I bought something that I could afford. What’s conservative about this?
Absolutely – and not just housing loans either. There are other problems still out there.
Is it fair to say that securitization of subprime loans in the mid nineties worsened this whole issue? Every social program I’ve read about so far has (according to history and statistics) ended up making things worse for everyone, particularly, the people this program was designed to help. Are there any social programs that have historically been shown to be beneficial?
Thx
Most of these programs are put in place to guarantee demand for housing and to provide funding for such demand. FHA, Fannie, and Freddie were all created with the idea that wealth and prosperity could be achieved by home ownership – no matter what the cost. These programs create artificially high prices, and actually serve to make housing unaffordable. The same situation is being seen with regard to college costs. Guaranteed student loans have guaranteed higher college costs by fueling demand.
I’m interested to know the opinion that any economists or mortgage/loan experts have on the role that the Community Reinvestment Act plays in the current subprime train wreck.
Thx