Everyone's making sacrifices
ABC News brings us tragic tales of life in the financial sector:
“A lot of those people will have to sell their homes, they’re going to cut back on the private jets and the vacations. They may even have to take their kids out of private school,” said Frank. “It’s a total reworking of their lifestyle.”
He added that it’s going to be no easy task.
“It’s going to be very hard psychologically for these people,” Frank said. “I talked to one guy who had to give up his private jet recently. And he said of all the trials in his life, giving that up was the hardest thing he’s ever done.”
I'm not a financial expert by any stretch of the imagination. The way I understand it, lots of financial institutions spent years loaning out money in really risky (but lucrative) ways. To prevent their investors from freaking out, they figured out creative ways to hide the riskiness. Everyone knew this was going on, but it meant more profits so no one was willing to look too close. After years of this, it was institutionalized: if the house of cards fell, it wouldn't be just one institution but loads of them all taking the fall.
Again, as I understand it, that's what we're experiencing now. Unless I'm totally mistaken, the problem is the systemic nature of the failure: all of the financial institutions were doing it, even the huge ones that have been thought of as 'rock solid' for decades, and if they collapse the whole economic structure goes topsy-turvy panic-mode.
Can someone knowledgeable about these things clue me in, or is the government essentially planning a $700,000,000 $700,000,000,000 bailout of people who got rich by making too-risky investments with other peoples' money?
Clueing in reveals you're right.
Greider says, yeah, that plus a huge power grab.
The beginning of Greenspan's
The beginning of Greenspan's book contains a description of what happened in the days immediately after 9/11, where money (and the things purchased by that money) stopped changing hands.
I don't presume to know what the goals are here, but I'd guess that preventing that kind of stoppage is one of them.
I'm with ya...
Banks. Federally insured for making unsafe investments and courting/grooming an ignorant clientele. : )
I'm kind of interested to see what would happen if we just let them collapse... it would suck for a whole lot of people in the short term and maybe put more people on gov't assistance (probably not $700bn worth)... but maybe some investors, CEO's, and consumers would get the picture.
And maybe people should stop buying home loans with adjustable interest rates prone to jump up 10% after a year or two of smooth sailing.
Won't Fix The Problem
I spoke with someone who deals with mortgages after the bail out and he pointed out that mortgage companies had started to get tighter on who they would loan to before they were bailed out. Basically, they were tighter in their loan process. Since the bail outs have happened they have started to loosen up and be riskier again.
Amazingly, we have a fairly low unemployment, we're not in a depression, and yet we're screaming that the increase in the economy isn't big enough. How sad is that.
It really comes back to our ability and desire to consume like locusts. We want more, bigger, and newer stuff. For the last 15 or so years that's come at the cost of saving where we, as an American people, have been depleting our savings. The debt, minus mortgages, of the American people is well over 2 trillion dollars. That's just scary.
Enough of my 2 cents blabbering.
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