“Bailout” – How Are You on It? Me, I am for it!

I am averse to the word “bailout,” it’s too pejorative. We need to examine this as the government investing in our nation’s solvency, thereby, saving our country and the world from Recession.

Why do I support this Economic Rescue?

Here’s the quick and dirty: watch J.P. Morgan buy Washington Mutual, and watch them thrive. Congress should move along with an economic rescue package similarly.

Why does the purchase of a failing bank work for JP Morgan? Well, like Bear Stearns, there are assets both firms hold, it’s just that their management blew too many calls.
Certainly, there is a short-term loss absorbing Washington Mutual, but the flipside to it is that Washington Mutual as JP Morgan, upon restructuring, holds enough assets to be a recoverable asset. Above and beyond that, the purchase of Washington Mutual allows Chase to move into the West, which means that I can consolidate back to one major bank (I opened another checking and money-market account here in Boise at another bank, mostly so I didn’t have to pay ATM fees).

Of course, in the case of the Federal Government shoring up mortgages, there are risks. On the other side to that, the risks of doing nothing far outweigh the risks of the Federal Government owning Real Estate (that outcome being the worst case). Right now, all of this paper money going around, if shored up by the Federal Government will keep the credit markets buoyant. No one I know is 100% liquid. In some respects, if not many, most I know use credit cards. Some may keep them paid off as regularly as possible; nevertheless, there is that smidge they have outstanding to a creditor. That’s not excluding all of those in the US with mortgages, car loans, businesses buying other firms, etc… In short, doing nothing could cause a catastrophic collapse of the credit market.

Okay, our government has failed us, in both their lack of regulation and allowing too much buoyancy in the market, both with loose capital irresponsible government spending. That’s to be sure. This coming November, please don’t forget the party 100% responsible for six of the last eight years. Does the Democratic Party share some responsibility for Fannie and Freddie? To be sure, but this ball started rolling about eight years ago, and it kept rolling unhindered right up to 2006.

Make them pay in November, but let’s not cut over our nose to spite our face. It’s that sort of irresponsibility we need to legislate against in coming years. We need to elect those that will effectively do that. Those responsible for this, they will pay with their loss of office or CEO positions, but we don’t all need to suffer for their mistakes. That is water under the bridge. Like Iraq, we can’t simply run right this second. We need to shore things up, plan for something effective, and then make a graceful departure. The Federal Government could do the same with housing here in the market, if things got worse. Even in worst case scenarios, there aren’t fewer people needing homes, there will always be value in homes in the US. That value might be reduced, but then, if the government restrains itself in their liquidation trickle, they can control that value. From a free-market perspective, it sounds dicey, but it’s better than the other way things could go.