Bailouts

I was going to write about the current discussion surrounding the the drinking age from 21 to 18, until I saw today's news article, U.S. may broker the rescue of Lehman.

I find it funny, albeit sad, that these big investment firms such as Lehman and Bear Stearns whose clients and bankers espouse the idea of limited government and lowering taxes are now seeking massive amounts of tax payer money to help them survive.

Yes, I'm generalizing, but this argument can be applied to all those who complain taxes are too high and the government wastes the money. Every one of those employees at Bear Sterns, Freddie and Fannie should be the biggest fans of a tax system that allowed them to keep their jobs and in Freddie and Fannie's cases, the disgraced CEOs to walk away with $24 million piece.

Bear Sterns and Lehman brothers are not banks. They do not have as many restrictions on their operations as banks. By playing by the FDIC's rules, the banks were unable to reap as much profit as these investment firms during the good times, but as we see now, they had a firmer footing during the current down turn. Having worked at a bank in the 90's and early 2000's, I remember the banks were lobbying to loosen the rules. Looks like it was a good thing they weren't. Now we have a perfect example of what happens to financial entities with loose regulation: investment firms are crying to our government, begging for tax payer dollars so they can keep their jobs.

I don't fault these firms for asking our government for assistance. If I was a business owner and I was facing bankruptcy, I'd be asking the government for assistance as well. But, it's up to our government officials to ensure rules are followed, government actions are fair, and tax payer money is used for the good of the nation.

Was IndyMac bailed out by the government when they went under? No. Why? Because they were too small. I mean what other differences are there be between IndyMac and Bear Stearns? One's on the west coast, the other on the east? The players at the investment firms probably (I haven't researched it) have more contacts in DC - more alumni from the same Universities as those in Washington. I've heard the argument, Bear had so many deals with other banks and investment firms and hedge funds, that to allow them to fail, could cause massive economic damage to our financial system. While I don't doubt this as true, it should be a clear sign that these firms need some type of security in place that either prevents them from entering contracts with regulated industries (i.e. banks) that if they were to fail, they could take everyone with them -or- if they want to be eligible for government help, get ready to be much more heavily regulated to ensure their risk to the average taxpayer is minimal.

In closing, I feel this real estate mess is due in large part to greedy people. Greedy people at investment firms, mortgage brokers and bankers who came up with new ways to turn a quick buck like the Junk Bonds of the 80's and greedy home buyers who bought homes to flip in order to make a quick buck causing home prices to soar, forcing those few who had limited funds but feared being priced out of ever being able to buy a home into making bad decisions.

The government definitely should not bail out anyone in this mortgage mess. They should only enforce the laws, create new laws to prevent the abuse that has occurred over the last ten years, prosecute the criminals who drew up these nefarious financial plans/strategies/products and bail out only those firms and individuals that our current laws allow for.

It just pisses me off see 100's of billions of tax dollars (yes, Freddie and Fannie alone, each cost us tax payers $100 billion - more than our first year in Iraq) going to people who played the market and got burned and now are begging for help. Worse, that our government is actually doing this. And most of this help is going to corporations and not the home owners. (See the current mortgage rescue plan passed by Congress.)