To the two people who are still reading after seeing that title: Hi!

This may surprise you, given my socialist pinko-hippie leanings, but I really don’t think this bailout is a good idea. That’s right, I’m against government intervention into private enterprise – in this instance.

I am all for stricter regulation of all Wall Street firms and banks and I certainly hope that comes out of all of this mess. Back when the completely useless and corporation-favoring Housing Rescue bill was passed at the end of July, lots of people spoke out against helping individuals who “recklessly borrowed more than they could afford” and were “irresponsible and deserved to lose their houses” which I found particularly offensive. When we bought our house, just before the peak of all the flexible loan craziness, the mortgage guy pushed us to get an interest-only 3/1 adjustable rate mortgage. And he pushed hard. The DC area housing market is an expensive one, so of course all that extra cash was tempting, but I did my research and ultimately decided that a traditional 30 year fixed loan was the way to go for us. We were lucky enough to have enough cash to put down 10% plus closing costs (which I still think are a total scam in many ways, but that’s a rant for another day) so we still benefited from the creative loan packaging in that we were able to finance 80% of our loan plus a second trust of another 10% to help us avoid PMI.

But let’s say that you are not a skeptical pain in the ass like I am. Let’s say you don’t have a job connected to the financial industry like I do. Let’s say you regard your mortgage broker as the expert who is supposed to help you, but what he does instead is steer you toward the option that will make him the most money instead of the option that is best for you. It happened over and over again. Sure, some people were greedy and intentionally overextended themselves, but most people who took those loans just wanted their piece of the American dream. Instead, they got screwed. But the people who fell for those loans are heaped with scorn and deemed deserving of their misfortune.

The so-called financial pros on Wall Street, however, made insane profits for years because of these loans and repackaging mortgage backed securities. They knew what they were doing. They knew what the risks were. They actively resisted attempts to provide relief to consumers who found themselves with loan payments that tripled when their mortgages adjusted up, to people who found themselves with houses worth less than what they owed on them as the real estate market crashed. But now, now when these giant corporations which made obscene amounts of money over the last few years while getting tax break after tax break from the Bush administration run in to trouble, we’re supposed to bail them out? Hey Republicans, your laissez-faire policies got us in to this mess, and now you're abandoning your principles and sticking the taxpayer with the bill! That's...awfully hypocritical of you.

I understand, to a certain extent, the thinking behind the bailout plan. Get the bad loans off of balance sheets and get banks and financial institutions loaning money again. That will theoretically help get home sales moving again, and will help businesses keep capital moving and will hopefully stave off trouble in the commercial real estate and retail sectors. I just don’t think that your proposed bailout is the way to go. Let the companies that need to fail, fail. Shore up the protections that you offer your tax paying citizens, like FDIC and SIPC and unemployment and allow foreclosure relief where the terms of a loan can be renegotiated. Find other ways to encourage the companies that are left to make loans. Instead of spending $700 billion on a bailout, ease restrictions and make it easier for companies on the brink to be acquired or to go through mergers. Any company that does get any sort of bailout should have to pay the government back once they are making profits again.

For once the House and Senate are pushing back instead of just rolling over and giving the Bush administration what it wants. I hope they stick to their guns on this one and actually come up with a plan that can help our economy and our stocks find their balance that makes sense.

Posted by Bad Penguin at September 23, 2008 11:11 PM