Stop Bailing These Guys Out!

Will someone tell me why the Federal Government is going to create a massive bailout for all the floundering financial institutions by taking on all their bad debt?  How is this going to solve anything?  Once again, the Federal Government and the Federal Reserve are just delaying the worst of the downturn til a later date.

When the Government intervened and negotiated a merger between Bear Stearns and JP Morgan  at a cost of $29 billion, everyone was saying that it created a “moral hazard.”  This hazard was that banks could take all sorts of unnecessary risks to make a quick buck, knowing that the government will bail them out.

If the Feds were going to take on all this bad debt – probably hundreds of billions of dollars worth – why did they spend the $29 billion on Bear, the $85 billion on AIG, the billions they have lent out through new auction facilities, $150 billion to other countries, and take on$300 billion when they took on Fannie and Freddie?  Why wouldn’t they have thrown the whole “moral hazard” thing out the window instead of wasting all this money?

To me, it looks like a disorganized group scrambling to appease Wall Street.  After all, the Federal Reserve, which controls the money supply was created by the investment banks on Wall Street to begin with.  Who do you think their allegiance is to?  You and me?  C’mon, get real.

If they are going to take on the malinvestments of all these banks, why shouldn’t they take over mine and everyone else’s mortgages?  Why do the banks get a free pass?  It just shows the state of our country.  The officials we’ve elected will let the Federal Reserve run amok and then have us pay to clean up the mess.

Now though, McCain and Obama are calling for more regulations and more oversight.  That’s a bunch of baloney.  There should be less Federal intervention and Congress needs to reign in the Federal Reserve.  Rather than regulating the banks, they need to regulate the money printing machine in Washington.

Let the markets work.  If we had done that, we would have had a small recession when the dot com bubble burst.  Instead, Mr. Greenspan decided to lower interest rates to 1% and triggered a boom of cheap money and easy credit.  Not only did he lower rates artificially, but he kept them there way too long.  Banks leveraged themselves way too heavily with complex debt instruments.  The entire bubble was caused by Federal intervention!

If a few banks fail and get bought by others, that’s letting the market weed out those that made bad investments and bad decisions.  By bailing out these companies, we are basically giving them all a free pass at the expense of the American taxpayer.  If you or I go to Vegas and take out a line of credit and blow it all at the blackjack table, we don’t get to just say “sorry” and walk away from it.  We have to pay it back or go to jail.  Why do Wall Street banks get to play by a different set of rules?

The guys in Washington who are printing the billions of dollars for these banks need to be pulled back by Congress.  In the Constitution, only Congress has the power to create money.  However, they passed this responsibility to the Federal Reserve.  Now, it is time for them to pull some of that power, if not all of it back.  In the end, they are still responsible for the actions of the Fed.  If it is my responsibility to pay the bills, but tell my wife to do it and she doesn’t, the lights still go off.  Just because I passed on the responsiblity doesn’t mean that I don’t have to face consequences.

Since we are using paper money that does not have any real value, Congress needs to limit how much money the Fed can print every year.  How much is enough?  How many billions of dollars can they create?  I know that they say they are “loans” but they are taking garbage debt as collateral.  They will be lucky to get pennies on the dollar.  That’s our money they are using, or losing to help out Wall Street.  Congress needs to put an annual cap on the money supply or stop the Fed from printing money altogether.

You realize that for every dollar the Fed creates, the value of the dollars in your bank account decreases.  In order to help the big banks, the Fed has thrashed the dollar and created inflation.  Sure, their numbers make it seem like there is no inflation because they take out food and energy.  Last time I checked, $3 a gallon gas and the rising food prices have caused me to relook at my spending habits.

Instead of putting band aids on the system, it needs a complete overhaul.  The Federal Government has to let the market work and let the banks go under.  If not, they will just keep creating new and more complex investment vehicles and taking more risks because they know the Fed will bail them out.  We need to hold banks to the same standards that we are held to.  The American government should not take money from tax payers and give it to a select few companies.

In this election year, we should not be voting for candidates that offer more government oversight and intervention.  It hasn’t worked so far and it won’t work in the future.  We need to stand up for an overhaul and tell the two major parties that we’ve had enough.  They talk about change and reform but their reforms are just minor tweaks to a system that is broken.

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