Definition Of Insanity

“doing the same thing over and over again and expecting different results.”

There is some great stuff around the web regarding The Bailout, but I wish there were more attention paid to what i think are some root causes of this mess in the first place:  Stagnating wages, un/under-employment, increases in fuel costs, food prices, etc.

We bail these firms so they don’t “crash”, yet we do nothing to address the factors that lead us here? Perhaps this isn’t possible.  I saw this quote today:

If you catch a cold because you got caught out in the rain, you don’t try to change the weather. You take your lemon tea and an aspirin.

Ok, so if we cannot eliminate greed, speculation, short-sightedness, etc, why not, in this case, circumvent the system and go directly to the individual homeowners?  If roughly 80% of the loans are “good paper”, can we not shore up the other 20% (provided they are owner-occupied, to hell with the house flippers) until real estate values catch up with the amount owed?  Because, eventually, it will.  It has to.  Whats the old saying about real estate?  “They ain’t making any more of it?”

I realize that there isn’t a palatable choice out there for us as taxpayers.  But, surely we can find balance to this situation, and spend the money wisely, expecting a return in time for our children to benefit from this decision instead of having to pay for it.

EDITED TO ADD:  Wow.  Go read this article.  Heres a key quote:

The Treasury Secretary’s authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion — then sell some at a loss — and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It’s conceivable the Treasury could buy and sell trillions of dollars under this authority.

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9 Comments

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9 responses to “Definition Of Insanity

  1. nm

    Yeah, but … you don’t catch a cold because you got caught out in the rain. You catch a cold because you have been exposed to a cold virus. So I suppose that quote is indicative of the “nobody really knows how this stuff works” problem, but it isn’t exactly medical advice that inspires trust and ought to be generalized to non-medical areas, ya know?

  2. I’ve been around medecine long enough to know that NOBODY knows how a cold is caught. There are at least two schools of thought. The point, I think, is that the problems are systemic. A quick fix won’t address that. If the idea is to help Main St, lets put the money directly there, bypassing the bloated salaries, fees, and other “re-directions” built into the system.

  3. nm

    Nobody knows how to prevent a cold, but I promise you that you could stand out in the rain for a week and not come down with one so long as you kept away from other people during that time. For the rest of it, I think Dodd’n’em are making sure that (1) there will be oversight of the process, including some market regulation, and (2) if this all works and the market gets profitable again, the taxpayers will benefit. This time, they’re not allowing themselves to be railroaded.

  4. Mack, To a big degree, it’s really not the mortgages that pose the huge priblems. Sure, they started it and I’ve thought something similar to what you suggest will work for them.

    But it’s the credit problems tied to the mortgages that are the biggest issue. Using bad mortgages, investment banks and mortgage companies created “investments” that leveraged the value of the mortgages by as much as 35 times their value. Banks, ther countries, mutual funds, 401(k) plans and foreign companies bought that crap. If it all goes under, sure they all lose, but the economy and available credit will suddenly and completely disappear (I initially typed that as dieappear, it’s definitely Freudian).

    Nobody will be able to get loans, so people will buy less and less and companies will tighten budgets even more, laying more people off, which means loans will come due and not be paid. Everything works on such tight margins now that it wouldn’t take a huge amount of retrenching to see banks close up and blow away like they were never there.

  5. Then, Jim, same principle applies. Put cash out there to lend to responsible borrowers. But to do this through the Treasury invites all manner of graft, and reduces the net amount available to actually use. That much seems built into the system.

  6. Mack:

    This:

    “$ 10,504.31 or about $29.18 per month. Why, it’s just like a “Christmas Club savings account. The CEO’s get to open their gifts for the next 30 years, we get the bill! And this will secure my future? how?”

    is part of my rant, today, over at my place.

    I agree with Jim that something has to be done, but I think it’s long past the time that we need to show the assholes who really brought this about, the “experts” what true responsibility looks like.

    The DoJ said this morning (last night?) that they are already investigating both Fanny and Freddy as well as Lehman Brothers and AIG for possible fraud. I say investigate them all, arrest the ones that broke the law, strip them of the proceeds onf their ongoing criminal conspiracies (I want to introduce you to my little friend, RICO) and toss ’em in the pokey. When they get ready for work release, make ’em work at Wal-Mart.

  7. Well, it’s all a moot point now that McCain is putting his campaign on hold so he can lead. I’m sure everything will be perfect shortly. In fact, I’ll bet a subprime loan on it. 🙂

  8. nm

    Eh, he’s suspending personal appearances and trying to avoid being obviously less prepared to talk economics than Obama at the debate Friday, not putting his campaign on hold. I’m pretty sure he’ll still be running lying campaign ads, having his surrogates on news and talking heads shows, and stuff like that. That’s not a suspension of the campaign. I’m sure that once he gets t skip the debate he’ll pick right back up.

  9. nm:

    “Gosh,” said Dorothy, “Somebody’s cynicism meter must be pegged. Let’s all just sing “Over The Rainbow” and everything will be, oh, so much better.”

    JohnnyPOW McStain being something less than a hero? It can’t be true.

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