this is corporate welfare. We are robbing the taxpayers (teachers, doctors, nurses, fire fighters, coal miners, police officers, construction workers, retail workers, office workers, etc.) and using THEIR money to keep paying the salaries of greedy idiots and risky corporations. I am glad we avoided another Great Depression, because that's clearly where we were headed, but we can't just hit the "reset button" without causing someone pain.
THE RTC IS NOT DESIGNED TO MAKE TAXPAYERS MONEY!!! The government will buy these horrible loans (worth 22 cents on the dollar AT BEST) for 60-65 cents. After holding them for 5-7 years, the government will then sell the loans back to banks for 30 cents on the dollar (of course by then these loans will have appreciated considerably because the "bad" loans will have been purged during the 5-7 years of holding. DISGUSTING CORPORATE WELFARE!
P.S. My portfolio was up 8% today. I will give ALL the profits to charity.
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Everything you write is correct, but it's easy to sit back and criticize the way the problem is being handled (or, more accurately, the way government officials are proposing to handle it). My question is, do you have a better solution to the problem? Probably not. And I certainly don't have one, either. One thing we can probably agree on is that this is a big, stinking mess of epic proportions.
There is a significant chance that the entire global financial system may suffer a liquidity run leading to mass insolvency -- something that could trigger a deep recession, maybe even a global depression. Systemic contagion is spreading exponentially, and rather than run the risk that it would "work itself out," the powers-that-be opted to cobble together a backstop program. And there's still no guarantee it will work, despite the trillion-dollar commitment.
And yes, this means the U.S. has instituted a European-style socialist solution. It's probably best to just take a deep breath and let it go. Notice this wouldn't be so humiliating if ultra-conservatives hadn't forged careers based on bashing the European style of capitalism. The Europeans are no better or worse than us -- just different. It's time for the U.S. to get off its high horse and stop preaching to the rest of the world that we have better styles of capitalism and democracy. The collapse of our financial system is a humiliation, and it would be refreshing to see our business and political leaders begin acting with an appropriate measure of humility over the mess we've made.
To make this easier to swallow, allow me to point out that the U.S. has always practiced subtle forms of socialism. The big bailout is just another (albeit much larger) move in that direction. Public services like K-12 education and police and fire protection are all forms of socialism -- we pool tax dollars and provide everyone with the same services regardless of the magnitude of their contribution.
Conservatives are creating the "socialist" smoke screen to take your mind off the real scandal -- the global financial crisis was created by big business (I used to own an online mortgage company that did business in 23 states, so I understand the industry). Without the semi-"socialist" GSAs (Fannie and Freddie), we could have never written as many mortgages as we did. (Of course, consumers are equally to blame -- just because Burger King makes Whoppers doesn't mean people have to eat 10 of them a week, right?)
The U.S. lead the world into this mess -- we have to accept that, it's inarguable. We haven't been practicing a better form of capitalism all these years, just a different form. And the way we practice capitalism will be permanently changed by this bailout. The phony-baloney ultra-conservatives will never be able to bash Europe again -- the U.S. created the biggest financial mess of all time, and used a socialist mop to clean it up.
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