Topic: Big Three Bailout

[Jianna]

Call me an extremist, but i think it wouldn't be such a bad idea to ban credit cards and fix the mortgages to the bank/company that issued them in the first place.

It's probably a bit late, but it might help or at least stop this kind of thing happening again.

No credit cards?  You mean actually force people to live within their means?  Now there's a concept.  Make lenders keep the paper on the loans they make?  Heavens!  That smacks of regulation, limits!  The bane of a free market economy!

[/sarcasm]

[G-Man]

*shrugs* tariffs, subsidies and bailouts are all forms of regulation. All of which the American government already has. Maybe a form of regulation which actually helps the people and the economy would be preferable?

but..... it's too crazy a concept to catch on...

[Geoff]

I suppose that's why I can't support a "do nothing, wait and see, let them eat cake" approach to this.  I always thought that was one of the lessons we (should have) learned from back then.

Ten years before the freefall that begat the Great Depression there was an equally ferocious downturn in the economic markets.  The government stayed clear, the markets were allowed to crash and a lot of bad debt and investments were liquidated.  The result?  The economy recovered in less than a year.  Fast forward ten years - the markets plummet again, but this time the government steps in to prop up prices and buy out bad debt.  The result? The Great Depression goes on for over a decade (two, if you listen to some people).

Maybe the lesson we should have learned was to leave well enough - or bad enough - alone.

[Jianna]

I suppose that's why I can't support a "do nothing, wait and see, let them eat cake" approach to this.  I always thought that was one of the lessons we (should have) learned from back then.

Ten years before the freefall that begat the Great Depression there was an equally ferocious downturn in the economic markets.  The government stayed clear, the markets were allowed to crash and a lot of bad debt and investments were liquidated.  The result?  The economy recovered in less than a year.  Fast forward ten years - the markets plummet again, but this time the government steps in to prop up prices and buy out bad debt.  The result? The Great Depression goes on for over a decade (two, if you listen to some people).

Maybe the lesson we should have learned was to leave well enough - or bad enough - alone.

Presidents Harding (1921 to 1923) and Coolidge (1923 to 1929) were really rather committed to the concept that government should not intervene in the economy.  Hoover?  Well, he talked out of both sides of his mouth on the issue.  But it was his Treasury Secretary, Andrew Mellon (he was, incidentally, Secretary under all three), who said:  "Liquidate labor, liquidate real estate... values will be adjusted, and enterprising people will pick up the wreck from less-competent people."  That was in February 1930, a very few months after the 1929 stock market crash.  Toward the end of his presidency, Hoover made some moves toward trying to rectify the situation but it really was a case of too little, too late.

My former boss was lamenting the recent election.  He was trying to console himself when he said "it took a Carter to give us a Reagan".  My response was, "yes, and it took a Hoover to give us a Roosevelt".

[MalorGradan]

Maybe unrelated, I don't know, but just this past week my sister's mortgage, which had been with GMAC (and from what little I know it actually a good one...she admits that had she been offered a bad one she'd have signed anyway out of ignorance...which is why low-income college sophomores perhaps shouldn't buy houses, in my opinion, but maybe that's just me) got transferred to another company.

She didn't even know GMAC was related to GM, and said that if she had she wouldn't have gone with them; she owns a 1992 Pontiac and has sunk more money into fixing it than the car cost, and swears she'll never buy another GM vehicle.

Maybe this won't have an effect on her mortgage...but it's interesting how the changes and collapse of industries trickle down to some things you might not realize were even related. I didn't.

[Archelous]

Sorry to hear about your sister's troubles, charities are concerned especially about their flow this year, as the big three had to cut back on just about every donation.

And you can't really blame a 16 year old car for kicking the bucket.

[MalorGradan]

Sorry to hear about your sister's troubles, charities are concerned especially about their flow this year, as the big three had to cut back on just about every donation.

And you can't really blame a 16 year old car for kicking the bucket.

That's what I say, but as my motto states: nobody listens to Pat. As long as it gets us to Newton, KS and back for Thanksgiving and Christmas I won't complain.

And yeah...I work for a non-profit and donations are drying up across the board, and those charities that provide direct services (food, medical assistance, etc.) are really hurting. This winter may be scary....

[Todd]

While I agree, Todd that the bailout going to the people would have helped alleviate the mortgage crisis, I have to say I have a major issue with the American Victim mentality that posits that the mortgage lender who gave the subprime loan is the root of all evil while the person who applied for and accepted that loan is an innocent by-product.  I've got an employee who is currently filing for bankruptcy because he couldn't make the balloon payment on his 3-year ARM and had to take a loss on his house that crippled and finally killed his credit rating.  He knew 3 years ago that he couldn't make the payments once the the balloon payment came around, but he took the loan anyway thinking that he could refinance before the bill came due.  Problem is his house didn't appreciate like the mortgage lender said it would; it depreciated almost immediately.  3 years later, he can't sell unless at a $50k+ loss and the rest is history.

Is he a victim?  Maybe, a victim of a short-sighted and potentially corrupt system but also a victim of his own inability to look dispassionately at what was obviously a fool's gold proposition for something as mind-alteringly serious as buying a home.  He may have been victimized, but he is by no means blameless and he, like so many of the other people across the country currently defaulting on home loans because the monthly payment just doubled need to realize that they were - and are - part of the problem.

Well, I wasn't trying to paint the people who took the loans as blameless, since I think quite the opposite. The problem with the bail out right now is that it isn't doing a thing that they said it would. Banks aren't lending. If the bail out money had gone to the people the bad loans would start getting paid again, and then their could be a mandate to re-negotiate those loans. Right now people are still losing their homes, the banks aren't lending, and the economy is still going down the ****ter. As you know, I wasn't really in favor of the Wall St. bail out anyways.

[Archelous]

Some interesting articles i've found published in the local Detroit paper about the status of the Big Three:

It's called a "Loan"
Ford's willingness to compromise

Give us some slack, we have to watch the Lions play after all.

[Todd]

I actually like Ford's plan, it seems rather forward looking, but I am pretty sure it is the plan they've had in place for awhile. They are the only one not asking for a bailout though, but a line of credit in case things get worse.

GM's and Chrysler's plans aren't that great. GM's plan, cut plants, cut dealerships, cut brands (bye bye Hummer, Pontiac, Saturn and Saab) either by sale or closure, sell half of Buick to China and keep doing the same thing only with less now. Chrysler pretty much just says, give us the money and we'll stabilize.