Tuesday, September 23, 2008


The questionable collapse on Wall Street of some of the largest players in the banking and mortgage industry, should raise a number of questions, and be a cause, not for panic, but of review, of our personal finances. It has been repeated over and over, that the devil’s is in the details. And it is these details, some glossed over, some buried, and some ignored, that every business, home owner and consumer, should make a concerted effort, to understand. Make no mistake, this bail out, whether you are for it or against it, is going to cost taxpayers for years to come. And if it does not work, it is quite possible, that we could go into a deep dark depression, that will take years to recover from.
There are those who believe we need to do something, if nothing more that to make sure, other countries are paid and paid in full. There are those, who believe, that government should take over the financial markets, and create another layer of government intrusion which would control the financial dealings of everyone.
Why is this happening now?
The money people, those that invest, lend and buy investments, have exceeded their ability, to control their debts. The timing has been off. And much of the money, everyone thought was going to be available, has not made it to the table. The financial markets are out of control, and getting ready to crash. The cause is poor planning, greed, poor timing, and manipulation of investments for the quickest return, with higher yields, which created the greatest risk. And now, things are out of control.
Why are we seeing the biggest of the biggest, now in financial ruin?
The greed factor, along with shaky loans, and housing down turns, caused these giants in the market, to borrow more and more, with the hope, that conditions would turn around, and the loans could be paid back. Such desirable conditions did not materialize, creating a problem of too much borrowing, and then robbing Peter to pay Paul, with promises of tomorrow. Many of the larger firms were left holding the sack, so to speak, and unable to capture the returns necessary, in real money to continue.
The firms were free and easy when the market was working and money was plentiful. And like the ant and the grasshopper story, when hard times hit, they were not prepared to weather the storm.
Will the Government do something? And what are they going to do?
Depending on who you want to listen too, there are some misguided souls, who believe the problem is government, or the lack of government involvement in Wall Street. But the truth, is, if the government would not have tried to be a banker, would not have inflated the currency, and drowned the market in printed money, so the money supply was too plentiful with out much backing, the whole mess would not have happen. What is the government going to do? They will do a fix. Temporary at best, short sighted, and with more political wrangling than necessary. Citizens will find, no end to attachments for the fix, by those whose job it is, to do something.
What started out as a simple agreement last year to lend money to the largest banks and brokerage houses, who were short of cash, turned into a money pit. The loans were not enough.
In March of this year, Bear Stearns, due to greed, poor practices, inside wrangling, found themselves out of options, and out of money. The Feds ( the Federal Reserve) stepped in and arranged a 30 billion loan, which made it possible for a buyer to step in. The Buyer was JP Morgan, the purchase was made with taxpayer dollars, at less than true value of the company and the stock. JP Morgan, made the sweetest deal of any business in 2008.
And now panic has set in, and we see Fannie Mae and Mac, Lehman Bros, Merrill Lynch and the insurance company, AIG. All facing cash short falls. The Federal Reserve, did not have the money necessary to bail out the problems, so they effectively went to the people (the actual Government) and borrowed more money from the treasury. What they borrowed, with what they had already put into this so called saving deal, will exceed one Trillion Dollars.
With this sweet, sweet deal, one must ask, where did all the money go, the companies had? The question is valid, the answer is hard. In truth, some was lost due to shaky loans, inflated home values that did not exist, and in many cases, the money never did exist.
Defaults on loans, foreclosures on homes, due to falling prices, and large unrealistic loans, thereby producing deals, in which home owners owed more on their house, than it was worth. People were falling behind for a myriad of reasons, on every loan from cars, credit cards, homes, business and the personal loan, which had no backing of product.
Now the government comes along with a 700 billion bail out, which will go to one trillion. There are those who believe home owners, should be bailed out of bad loans. And on the other side, are those who believe, home owners are the problem, and they should take the brunt of the financial collapse.
But the main player in all of this problem is greed. And to reward greed, is to go against common sense, and fair play. But the Government, is now in a position, that politically, they must do something. As to what, when and how, remains to be seen. But this is certain, taxpayers should pay attention to the details. They should view with skepticism anything that sounds to good to be true. And the last thing, which is the most important, taxpayers will pay, regardless of the fix. And we can count on seeing increases in taxes, a refusal to continue the Bush tax cuts, and blame from the misinformed on everything, from the War to Social Security, but no one will have the intestinal fortitude, to attack the greed factor, and allow those who are greedy, to lose.


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