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Tuesday, September 30, 2008

The Bailout's Failure is Bad?

The bailout is apparently bad news for the housing market, or so says The Associated Press. It seems to me that as time goes on, people get more and more into making money, and less into what they are actually doing. While being quite young, at least relative to those I am speaking about, I feel I have the right to say that. I know that people have always been trying to find ways to cut corners and make a little more profit, but is it really worth threatening the economy to crash worth your next vacation? Well I hope it was a good one, because next year’s is going to have to cost a little less for some bankers over on Wall Street. The bailout is still (at least at the time of the articles I read) at a deadlock, and people are complaining. That’s what people do best these days. Many contractors are having trouble finding work so they seem to want the bailout to pass more than anything. I don’t blame them, especially the small ones. They’re going to have the lay off workers, cut wages, etc. just to get by this, which is if they make it. Then when we all become rich economists (ha ha), we’re going to have to deal with big companies when we want to build our mansion houses. In reality, what may be the worst about this crash, is that because the bankers wanted some more money, and made these loans that shouldn’t have been made, now the businesses that depended on them to make those loans are going to suffer. As someone who about to start looking for a house (perfect timing), I am not thrilled. If this bailout passes, unfortunately businesses may get the idea that if they get into trouble as those banks did, no big deal, Uncle Sam to the rescue, then we will really have a problem.
So how do we fix the problem? Ignoring the tugs from all the other businesses that were hurt because of the crash, let the banks deal with it themselves. As parents tell their children, it’s your responsibility. Isn’t that why parents give their children pets? To teach responsibility? Maybe those bankers never had pets as children. Regardless, with my little understanding of the whole thing, I think we should skip the bailout. However, I do believe we should offer a small compensation to the businesses hurt by the banker’s poor decisions; it was not the contractor’s fault that the banker wanted another vacation. This compensation needs to be small, and needs to be for a short period of time, perhaps just enough to keep them all from sinking. I’m afraid of saying externalities because of externality abuse, and it is all within the market, however the banker didn’t intend on hurting the contractor’s business, and the contractor was relying on the banker to make the loan so the buyers could pay him. Which leads to something else, if in the past x number of years all of these loans have been made that shouldn’t have been, then hasn’t that given false demand to the housing available? People would be looking for bigger houses than they would have provided they had gotten the correct loan amount. I don’t believe that the bailout would help that. So shred the bailout, and start from scratch and find a way to help out those hurt by the banker’s poor decisions, possible subsidies with extreme caution, and let the market work itself. As I told my friend who is a political science major, politics are politics, while entertaining to observe from time to time, they only mess things up for the rest of us.

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