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Saturday, September 27, 2008

US Crisis and Theories: Do we need more alternatives?

As of September 24th Palin has declared the idea that this economic bailout for banks and the latest AIG insurance company (and perhaps Wachovia and other hopeful small banks that are trying to lobby according to the Gazette) bailout has cornered the economy to a second great depression in an interview with Katie Couric.( http://thecaucus.blogs.nytimes.com/2008/09/24/couric-to-palin-great-depression/?ref=politics)- Really, can our government internal stabilizers be that bad? Have our stabilizers not changed since FDR! Could our would- be vice candidate for the Republican side be that comfortable folding her cards before she went through the next round of metaphorical poker?
Our economy has come up with many ifs and flagrant regard to cry wolf while complaining about what we should have done. Well perhaps the ifs are theories of what we should do rather than throw in the proverbial towel. If the government intervenes through Fannie Mae and Freddie Mac will we, the US, be better off? Or like other state intervention can the government remove itself like it does a protective tariff for a new industry where it reduces risk by a certain percentage and breaks apart the company and sells it? Or according to one of our classmates to let government subsidize or give tax breaks to other domestic or foreign companies to buy these companies?( If I am wrong about the classmate’s response please let me know). Thirdly, could there be a reason for removing the fluctuating rates or variable rates of the current arm loans to replace them with the same fixed rates? Why can’t advisors come in to these individual foreclosures to realize the equity that hasn’t been pulled out by some to help reduce some homeowners payments is it really too late?

Saturday, US treasurer and leading economist , Hank Paulson and Ben Bernake, came together to make a plan they conveniently dubbed the "Paulson Bernake plan. According to the media this plan involves a lot of tax payer money for the government to internalize this bailout utilizing 3 essential steps within this bill.

1) Eight hundred Billion dollars towards a fund that buys "toxic assets"= Fannie Mae and Freddie Mac.

2) Four hundred billion dollars towards insuring money market funds= insure banks with FDIC (and NCUA?) which provides insurance up to 100,000 dollars per depositor per institution?
FDIC does not include however: the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an insured bank.( http://www.fdic.gov/deposit/deposits/insuringdeposits/ ).

3) This plan is to be considered similar to the same bill during the savings and loan crisis.

I think that giving more money to the FDIC is very good idea but I’m not sure about the great amounts of tax payer money as free grants to these people that decided on these ARM loans. I think that people that do pay are suffering the consequence of being a good financial citizen. Where are the consequences dished out by the government or free market to those who have made these bad choices? As for those that made the deals should to my belief be tried in court with the court’s appointed lawyer instead of CEO's recieving serverence packages.

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