Thank you for your detailed and thoughtful response to my comments. Some of what you say in your response to me was, I believe, addressed in my comments to Ron in the thread between my comments to you and your response above. I usually address my comments specifically, but understand that the forum is a public one.
I'll try to address as much of your letter as I can at this time and try to get back to whatever I miss as some later date.
Your assumptions have missed the target.
I'm uncertain about the meaning of what you're saying here. I mean I'm literally uncertain of what you're saying here. Assumptions are not arrows. I'm not sure which assumptions of mine you're addressing; but at any rate assumptions are preconceptions about the nature of things or conditions and are what arguments are grounded in.
And exactly what is the target you are talking about? I am apparently missing something with something, you believe—and you may, by the way, be right—but I can't tell because the point of what you're saying here is lost to me. I assume the fault is mine and that I have simply failed to follow the obvious, but I would be grateful if you'd fill me in so I can further clarify your point, contest your point or concede it.
This crisis is nothing new to me. I’m an insider who became an outsider, 5 years ago. On January 1st, of 2003, I no longer had a job.
The amount of new qualifying loans became sparse. I wouldn’t do junk loans, nor would I purposefully over-estimate/appraise the worth of property. Nor would I finance a person over 75% of the appraised value. I also wouldn’t shave the numbers to qualify them on their debt-ratio or any other reported figure. And I refused to tack-on sneaky insurance products which gained the industry pure profit and the customer a higher monthly payment. I’ve never issued a variable interest rate and feel such is nothing but a shark tactic that needs legal examining. My earlier suggestion was pure sarcasm but no less fair for them if they enforced a variable rate.
According to the bank I worked for, I didn’t do anything “right.” They were the 4th owners I’d had in 10 years, and they were no different, fundamentally, than each of the prior owners. Fear and greed, is as ingrained in the money industry as the tiny red fibers of our bills.
I took my own personal losses and I went home.
I have a great admiration for you. It sounds as though you managed to get out with your integrity intact, though still feeling considerably bruised from putting up with the greedy and rapacious folks for as long as you did. I'm admiring, as I said before. I suspect it's more than computer-geek talk when people say "garbage in, garbage out;" it may be some sort of cosmic law of karma. I can hope so at least a little bit, can't I? and of course the loans ended up in the trash—no quality control on them at all, was there?
What happens, though, if we do nothing to deal with this situation, rw? Will you feel better?
What are they really doing with a bail-out?? Since this isn’t the first one, how are we dealing with it?
What could I possibly feel better about? That I had to adjust my income to 1/4 what it was with unemployment? Yes, actually. I feel fine. I stuck to my principles, and I went back to college, and I started my own business without borrowing a penny. I worked really hard to rework and rethink my standing and I didn’t ask you or anyone to bail me out.
I think that's wonderful. I mean this without any under-text at all. I think this is wonderful that you have the wherewithal to manage this. You sound proud, and I believe you should be proud. There still are businesses you can start without borrowing a penny, and there are jobs for people to work at if you look hard enough.
The less money people have overall, however, the more difficult it becomes to start a business and to keep it going. The more the business and manufacturing segments of the economy contract, the less money businesses have to hire people. What you have done here, I believe, is offer a micro-economic answer—that of your own personal experience—for a macro economic problem. The answers on two different levels of scale may be completely different.
Take physics, for example. On one level of scale, one uses Relativity to make decisions, on another level one uses Newtonian mechanics to make decisions, on yet another level one uses quantum mechanics to make decisions. It may be possible that these are all related, but until we know how, the answers must be arrived at differently and they don't seem to be consistent across the board.
Nor is it at all clear that your micro-economic example applies to macro-economics. It gives people a certain comfort and sense of control to make that connection, but the connection is probably not that direct.
Is it seriously your position that the overpaid CEO folks will be the only people who will be punished? I have trouble believing that you think that doing nothing will stick it to those CEO people and will leave your friends and neighbors unpunished and undamaged, and that your own financial position will be miraculously untouched. If this is in fact your position, please take time to explain it to me; it's well beyond my reason to understand.
My position is that the people in charge of monitoring the practices of the CEO’s didn’t do their jobs, and now everyone is paying for it, again. Because we’re already been paying out for their salaries. A bail-out is just a national spanking for many who don’t deserve it and those that do still get to keep their bonuses for yanking the money chain the wrong way.
And I’m seriously not untouched.
What do you want to start with first?
My marriage? Over.
My home? Sold and downsized.
My kid’s college education? Had to push and pray for damn good grades.
My retirement plan? Rolled it.
Health insurance? Are you kidding?
But you know what? Life isn’t over as long as this lady has a voice.
I’m making it, day by day, and I’m helping others to do the same. I don’t know anyone who does everything right.
I think I need to respond to this exchange in two pieces. In the first piece, you respond to my question about the consequences of not bailing out these real estate and, more importantly, consumer credit situations, and reforming the bankruptcy laws?
Your response is that you think that this is a national spanking for us, the public, and that we don't deserve it.
I happen to agree with you on this point, by the way.
I believe that the government has run up a massive debt through its tax and deregulatory policies, has invited industry to dine at the trough, and is now attempting to hand the bill to the public. It has done so, I believe, on purpose to attempt to dismantle the efforts of the progressive movement in this country to put in a safety net in the firm of social security and medical coverage. In handing us this bill and an ongoing war, I believe the neoconservatives are attempting to make spending on such programs impossible for at least another generation, and that they are heedless of the actual social cost to the nation.
That is, however, my own private hobby horse.
No we don't deserve it, but we are being held for ransom for fear of what will happen to the macro-economic picture should we not pay off the cost of drunken spending spree run up over the past eight years.
My fear is the crumbling of the economy, including the one that supports you and your neighbors, rw, should somebody not try to get this debt paid off and to get some sane regulation in place to prevent it happening again.
The second part of my response is to your list of your losses. I'd asked about what you thought the consequences might be of not doing a bail-out, and your response was to offer a list of things you've already lost. I don't know how to go ahead and say this without seeming to diminish the massive effects of the losses you've listed and the efforts you've made to overcome them. I don't want to do that; I respect these things.
But my question was not about the past, and your answer was.
I was getting at the consequences of doing nothing for us, the people who will have to bear the cost, and you were answering a different question entirely. I urge you to consider the question I asked.
I also believe that your language here is so abstract as to be functionally meaningless. It's on the level of saying, "We'll use the power of gravity to harness the power of the falling water in the world and solve the power problems." That is, unless you can say how exactly you're going to make this work, it's probably implausible.
Uh, ok. But just so you know, my utilities/power here in Tennessee is supplied directly by TVA. Google it. You’ll see how plausible it is.
I know it's the TVA; Tennessee is on your tag, rw. That's why I used the example.
As you're aware, however, the Devil's in the details. What is a happy solution for the Three Gorges in China, though some dispute that, and for the Tennessee Valley area and for much of Quebec and upstate New York simply doesn't work for the Sahara or the Gobi, does it? It's a "black box" solution that you're suggesting, like telling the public we need more education every time another social issue comes up. Pretty soon, the school year is so taken up with mandated social issues, none of them actually get covered well and they're teaching a biased view of addition. Let me know when they start replacing gas powered cars with electric in Tennessee, by the way. There may be other reasons for non-use of a resource than availability.
1) What flexibility in which financial market to be used in which way within which extraordinarily limited time frame will keep the short term credit market functional and allow businesses affordable credit to purchase stock and pay their employees before their creditors foreclose upon them.
Every financial market is flexible or else we’d still be perpetually stuck on Black Tuesday. Floating a business from week to week on nothing but borrowed funds is a red-flag business that is bound to go belly-up. No one goes into business without the risk of failure being a very real risk, regardless of whether I feel badly for them or not, no one can float their way to retirement without making a true profit.
When you find somebody who says we should run businesses on nothing but borrowed money, I will disapprove of them as much as you do. Why you should bring an idiot like that up here is beyond my understanding, unless you're suggesting I said such a thing. I did not. Nor did I suggest you might be able to retire without a profit. Who made these statements?
And am I to understand that these statements are supposed to answer the questions that I asked above? They answered none of them. Why even bring them up?
2) The FDIC, which covers bank deposits up to 100,000 dollars in certain kinds of banks and certain other limited sorts of investments is a very limited fund. Without money from a bail-out bill, why do you believe there will be enough to cover the potential losses to depositors, including perhaps yourself. As all insurance schemes, FDIC is based on the notion that everything does not go wrong at once.
With our without a bail-out bill, you underestimate the power of the FDIC. And you underestimate just how far they will expand when it comes to a crisis. As I have expressed, the FDIC has just released an increase to $250,000. They also have the power to extend loan modifications, which means mortgages can be reworked to a fixed and affordable rate, preventing a foreclosure. Again, Google FDIC and it’s on their front page. They can walk in and take over a banking institution, anytime they see fit, and the business is “absorbed” into the veins of the government, so it’s much much more than an insurance scheme. Just ask Indy Mac. I may not agree with their complete set-up, but they are an entity already at work.
I have not looked them up, I assume they are as you say. However, to assume that the government can cover $100,000 of all deposits was clearly not enough, which says something about the depth of the problem. There is simply not enough money to cover $250,000 worth of deposits for everybody in the country, even given the fact that most deposits are only a tiny fraction of that. Those whose money is in banks know enough to keep the monies in separate accounts or even separate banks if it's over $100,000. The move to raise the insurance was one designed to bolster confidence, not to raise actual insurance coverage on anybody but the reasonably unthinking.
This government is not particularly interested in preventing foreclosures, I suspect; the banks and businesses are its constituents and not the people who own actual houses as more than a casual thing; not their major investment, certainly.
3) What other funds, specifically, are you talking about that are already present?
I’ve already mentioned the reserve for losses funds. Nearly every state has a buyer’s program funded by that state which can help with refinances and new loans. October is the usual fiscal renewal of that fund from taxpayers throughout the year. The VA fund for the military seems sound. I’ve already mentioned the unclaimed funds the IRS is sitting on. Open that up to the small businessman who needs a small loan ! State sponsored Lotteries are supposed to support student loan funds! Oh, and how dare I neglect to mention small business grants offered and given by the federal government. They are not just available to foreigners. These are the common funds off the top of my head with too many more to invest time in.
I thought you didn't think people should accept loans?
It's probably only for business you think they shouldn't accept loans. Small business "grants," those must be different. VA loans must be different. All of a sudden you're talking about government loans and grants, but you haven't assessed the amount of money needed or the amount available from the sources the say have it.
Perhaps it would be useful to check and see how much the need is and what the available funds would cover, don't you think? You have side-stepped the issue by naming potential sources of income, but not actually saying what the need is and then not saying what's available.
If the initial need here is for 700 Billion dollars, then where in this group of funds that you mention is there a free 700 Billion dollars? Otherwise, you could list mom's milk money next among the programs you're talking about with such confidence. Unclaimed money in the IRS is not yet IRS money, is it? It may even be yours.
4) Many regulations, including restrictions on the interest rates allowed by credit card companies and the relief available to consumers by bankruptcy laws have been done away with in the waves of anti-regulation mania that have been sweeping the country with the conservative turn the country has taken since the sixties. Now that we can see where the lack of those protections has placed us, the same spirit of non-regulation suggests that we do nothing to deal with the catastrophe that looms ahead.
Well, Bob. Many are already in the loom, and have been. It doesn’t always take a national catastrophe to be in one. I’m not uncaring by no means and by no means can I afford to be.
That’s my point. I know my worth. Unless more people start to realize this and live within their means there will be more government and less independence, and how can that ever be more for the people?
Where the heck was a bail-out for Katrina victims??
I’m sorry but unless it hits home, people just don’t get it. Maybe now, they will.
Sorry, rw, there's much I simply don't understand here. Again, literally. "Many are already in the loom, and have been[,]" I take for some sort of southern idiom I haven't run across before, but I don't know it. When you say you're not uncaring and can't afford to be, I want you to know that I believe you, and I know that you wouldn't have said such a thing if you hadn't have had a moment of thinking you did sound that way.
When you talk about independence from the government a bit later, even though I have a disagreement with you about this point, I think you should know that I believe that this sounds like your method of caring, a sort of tough love, that really does want the best for people. I can see that you want that as I hope you can see that I want that too, though very differently.
I'm with you when you ask about the bail-out for the Katrina victims. If you look at the GAO reports for that you can see where the bailout for Katrina victims went, what little there was of it. It would only upset you as much as it does me. As does the current state of things there.
As for the need for government, how much and in what form, that's a talk for another time. I find much that the government does much too intrusive, especially in the area of civil liberties and the expansion of governmental power, especially executive power. I hope whoever gets elected president will have the courage to scale back on the intrusiveness of government into civil liberties, but I don't know how to unring that bell. The Patriot Act frightens me blue. I'm not at all certain anybody knows everything that's in it, and the governmental reorganization and increase in governmental powers that has gone with it is not good.
Again, conversation for another time.
With admiration as well as disagreement, yours, Bob Kaven