Thursday, October 2, 2008

Panic can cause a prudent person to do rational things that can contribute to the failure of an institution.

Panic is being spread by the President, the Fed, and every proponent of this bill. Bush stressed today that “this is an issue that’s affecting hard-working people. They’re worried about their savings; they’re worried about their jobs; they’re worried about their houses; they’re worried about their small businesses.” I know I am only one homeowner out of millions but I’m not worried about my home. Maybe that is due to the fact I did not agree to some adjustable-rate mortgage because I had the ability to calculate the maximum amount I could afford monthly on a mortgage payment. Owning a home is not a right here in America it is a privilege. Crafting numerous ways to give unqualified or risky mortgage seekers access to NINJA loans (No Income, No Job, and No Assets) is not only unethical on the bank’s part but also irresponsible and shortsighted of the buyer. The bank should not have lent out the money without proper underwriting and documentation of income and consumers should not have purchased a house just because they could afford the payment for the first year before the rates adjusted. The resulting amount of defaulted loans and huge drop in market value of homes everywhere is not the sole cause of the “credit crisis,” but it the largest catalyst of this whole mess. The “credit freeze” is only a term for banks wising up and being cautious who they now lend to. Struggling to convince us that we must now give up billions of dollars we would rather see spent elsewhere in order to stimulate the economy and unfreeze these credit markets is absurd. I would rather the banks be cautious who they lend to and save us Americans the cash.

Having said that, the Senate shrewdly took a three page proposal and turned it into a four-hundred and fifty page bill with saccharine. I have a feeling they may have done just enough to sway the few voters they needed to so that this bill passes the second time around. Let’s look at what they added and why. First, they tacked on what even they refer to as sweeteners which are provisions that make it difficult for any lawmaker to resist. “This bill has been packaged with a lot of very popular things to give it even more momentum,” said Senator Jeff Sessions. Added was a $150 billion in new tax breaks and increased insurance on deposits from the FDIC. They are slow to tell us that new items being added would substantially increase the burden on taxpayers and the Senate version of the tax plan adds most of the cost to the deficit over the next decade. Representative Joe Barton, Republican of Texas said it best when he stated that “the bailout legislation that the Senate is sending back to the House is a fraternal twin to the one I voted against on Monday — meet the new bill, same as the old bill.” At the heart of this is still the same $700 billion dollars regardless of what other good legislation gets attached to it but now instead of agreeing with the bailout lawmakers “could now say they voted for increased protection for deposits at the neighborhood bank, income tax relief for middle-class taxpayers and aid for schools."(NY Times) All we are doing is “trying to get this thing passed” said Senator Harry Reid. Appears like they will do whatever they are told unless the order comes from their constituents.

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