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National Debt

Bank Failures Part of Cycle; Fed, Congress Should Remain Hands-Off

  • September 19, 2008

    The string of major financial institutions failing in recent weeks, from Fannie Mac and Freddie Mae to Merrill Lynch and Lehman Brothers, to those on the verge of collapsing such as AIG and Washington Mutual, are all clear indications that the standard practices of these and many other companies have not been as stringent and well-thought out as their customers and shareholders might have expected.

    The bulk of the financial crisis in the industry stems from bad investments in mortgages, primarily sub-prime loans, something that an ounce of foresight could have protected many of the companies from. Instead, pushing the bottom line for a quick buck became more important than the long-term solubility of the institution and while many made money in the short-term, those gains have all but disappeared as the companies face failure and bankruptcy.

    Despite Mr. Bernanke's, the Fed Chair, indications recently that government assistance to financial institutions facing financial woes would not be forthcoming and that the market essentially needed to self-adjust, the Fed and Treasury along with SEC decided on an $500 billion (that's 1/2 of a trillion) bail-out that essentially wipes away all the bad debt of companies.


    President Bush is requesting a $700 billion bail-out package that will require the debt ceiling to be raised to $11.3 trillion, and provides nothing to taxpayers in return except the bill, nor does it indicate how the money will be paid back. Imagine going to Las Vegas, gambling away all of your money and life savings, and then having the government write you a check to compensate you for your losses. Multiply the amount of that check by about 70 million and you can imagine what it's costing.

    Here's to hoping the treasury department can print all the extra money it's going to need.


    In return, the financial industries get the world’s most expensive mulligan and get to start with clean slates, yet without mandatory regulation or oversight.

    This move is a disastrous policy move that should have been never been implemented, less dreamt up in the first place. The economy needs to purge broken companies that act without regard to their customers and bankruptcy is a natural part of that system. This system is what reminds other companies that decisions have consequences and that they need to be prudent when making choices. This bailout only serves to assure companies that no matter how reckless and short sighted they are, the government will be there to save them and not to worry about consequences.

    Additionally, the U.S. government has record debt and with tax cuts, two foreign wars, and relief aid to every country from A-Z, we can’t afford to be bailing these companies out.

    We STRONGLY urge all of our readers to contact their elected officials and tell them to vote "No" to this bail-out plan, and if it does pass, ask them exactly where the money is coming from to pay for all of this.

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