Wednesday, October 01, 2008

Wow... And When I Thought It Could Not Get Any Worse

So earlier this week, while I was scrambling to keep a woman housed, the House of Representatives did the right thing: they voted down the bailout plan.

Why, you may ask, did this fill me with hope? Because the plan is wrong. It is going to reward people for making bad choices. This bailout is not going to get the economy going in the right direction because it is simply going to crease a sense of "if I frak it up really badly, then the government will help me out and wash me of my sins."

Yes, I know that the legislation was altered to affect executive pay for corporations which would receive help from the bail out. But I did not see anything in there about reforming the sector of banking and securities which allowed this mess to happen in the first place. Furtheremore, I did not see anywhere where it was mentioned where the government would get the money. As most people know, this country's budget, under the inept handling of the Bush Administration, has managed to roll up an impressive deficit. You know, the one that is almost 10 trillion dollars.

So now comes the Senate. Bad as the bailout bill was before, I was thinking that no one would have anything worse to throw at the wall. I was hoping that someone would have a better idea than "Throw money at it and hope it ends up alright".

Yeah. Well I was wrong about that.

The Senate bill, which apparently was passed earlier today (with both candidates voting for it) is the same bill that the House of Representatives shot down.... except that its full of earmarks. About the only good thing I can say about it is that it might resolve the AMT mess. Otherwise, it has about 8 billion in tax breaks (but hey, when you're already $ 9.8 trillion in the hole, whats wrong with cutting off another $8 billion in possible revenue), money to spend on rural schools (so, less money coming in, lets help it by spending more in an emergency), more tax breaks for homeowner who do not itemize (yes, lets help them more for doing less), and more spending on disaster relief for the South and Midwest.

What an incredibly great bill! I mean, lets give the Secretary of the Treasury $ 700 billion to spend to help rescue his old company, give out another $ 8 billion in tax breaks, and spend money in every region of the country. And how are we going to pay for this?

Some are saying that the government will make the money back on the mortgages that it is buying up. Let's think about this for a moment. If you could make money off these mortgages... why hasn't anyone? Why are these now referred to as "junk bonds".

This plan is severely flawed. This plan has gone from being an attempt at bailout (which is questionable as to whether it will actually help) to being an attempt by the belt bandits of both parties to get more of their pet projects pushed through during a time of crisis.

I guess the only thing to hope for now is that the Democrat and Republican Representatives who voted against passage last time will stick to their guns. Though I doubt that. With all that pork hanging in front of them, how can they?


B said...

I wouldn’t be surprised if the recent overhaul of bankruptcy legislation was designed for this economic situation; it turns human debtors into indentured servants. And that is necessary for the following reason:

The ’sssssss’ we are noticing with this credit crunch is just the leak before the big burst. This credit bubble has been inflated by a logorithmic base 10 scale of dollar creation.
The practice of using 90% of ‘real’ wealth for lending that can then be invested and re-deposited for recycling again and again for more and more credit probably has the same effect of simply printing more money. The difference between those two ways of creating wealth is that creating money by credit inflation redistributes wealth for the benefit of financiers. And printed money is real; not fake.

This credit bubble burst should, then, be creating a shortage of money. And the cure may be as simple as the government printing more money. The only problem with that scheme is that there would not be another bubble to burst to correct for over-inflation. Printed dollars don’t evaporate away like the ones the financiers are trying to sell taxpayers now.

And that is why those who have engineered this bubble need those new draconian bankruptcy laws. Only wage earners can turn this fake money into real wealth. And that is why the Bush administration and other supporters of the great bailout plan are adamantly against giving bankruptcy judges the right to restructure debt according to who is most responsible for making bad loans.

Bryant Arms

AngryBell said...

Well.. I never thought of it that way. I am not an economist, I am a lawyer by training so I did not look at it from that perspective.

On the other hand, while I am against the particular bankruptcy amendment (i.e. allowing courts to reformulate mortgages) I do think that that bankruptcy reforms of a few years ago were wrong since, as you pointed out, they essentially reduce debtors to indentured servants of the corporations.

Printing more money is not the answer here. At best, its just a band aid.

Thanks for the comment.