Is the nation's economy really "ok"?
Is the nation’s economy really ok?
That’s a good question these days with the collapse of the nation’s largest investment banks and insurance companies. And there’s plenty of fuel for debate on both sides of this fence.
I would argue right off the bat that our overall economy has enough diversity and energy to come to a complete standstill. So in that respect it’s still strong.
Despite a handful of years where the corporate greed heads completely raped America thanks to a regulatory indifference from the government, and an artificial bubble called a housing market.
On the other hand, if the government hadn’t bailed out AIG ($85-billion) on Tuesday, or the $100-billion rescue of government-sponsored banks Fannie Mae or Freddie Mac, or the $30 billion loan to JP Morgan Chase to buy Bear Stearns ... even the complete dumping of Lehman Brothers ... we’d be hearing about Wall Street suicides that would rival Black Tuesday and the onset of the Great Depression.
Thank you, Uncle Sam.
As for corporate greed heads ... I’d love to be a fly on the wall the moment they meet up with The Man.
As is reality, with the government footing much of the bill for these outrageously-incompetent acts of big business, we the taxpayers will accept the burden.
If the government hadn’t intervened, we are warned by the government and corporate financial gurus, the problem would spread into a global crisis, and everybody would be sailing down that smelly river in cardboard boxes.
Still, I bet you $5 I can walk into the city cafe and find someone who is less annoyed by that particular dilemma, and more willing to raise his pulse talking about the welfare momma who is having one kid too many and soaking the profits right out of his wallet.
Oh, the world we live in.
Deborah Goldstein, executive vice-president for the Center for Responsible Lending, was quizzed recently by Newsweek’s Daniel Stone about the cause of the newest collapses and its impact on taxpayers. It’s got important information because it drills down to you, the taxpayer, its effect on you and the upcoming burden you will share to fix things.
Asked “...how responsible are federal regulators for the collapse of these financial institutions?” Goldstein responded “I think the important thing to remember is that the crisis started when unfair and deceptive loans were made to borrowers – and in particular how the underwriting on a lot of these loans was reckless.”
She added the loans were made where a dose of regulation would have negated such action.
Asked if she thought it was hypocritical that the government is funding these bailouts for corporate shareholders when taxpayers are suffering on multiple fronts, Goldstein said there are only “voluntary” options to obtain mortgage modifications to keep borrowers from foreclosing. “There’s no strategy to ensure modifications are made on behalf of borrowers, and yet we’re seeing assistance go to the institutions that got us into these problems in the first place.”
Goldstein gave a sobering response when asked “What’s the impact here on the average taxpayer?”
She answered “I don’t think we know yet. Credit Suisse has estimated that there will be more than 6.5 million foreclosures in the next three to four years. That’s just the foreclosures themselves. Additionally, 46 million homeowners are estimated to see their home value drop by $356 billion. So really, it goes beyond the financial markets.”
Now ... there will be some who will argue that Treasury Secretary Paulson and others did a cost-benefit analysis and the price of not bailing out AIG (and others) would expand globally and sink this nation and others into a depression.
And possibly you’ll continue to read “analysis” stories in the Wichita Falls paper from those with a slightly-slanted perspective, specifically those in real estate or banking or the conservative Dillard’s School of Business at MSU, who will tell you the North Texas area is pretty darn rosy, almost completely unaffected by the turmoil impacting the rest of the nation.
And if it will make you feel better to believe these people, I am not here to stop you. I’m no Chicken Little. Heck, all I do is eat chicken.
I’m just saying ... save what you can back for a rainy day. And don’t keep more than $100k in just one place.
Things will get rough before we start to get better as a nation. I can only hope this will be a lesson to learn and not soon repeated.