Widem

Its not really as clear cut as you point it out. Banking is definately not socialized for starters, but I think what you have to understand is that the Bank's product is money. Money is used in the form of currency and the currency is the jurisdiction of the federal government. The point being is that before banks can be socialized they need to be in existance, but what comes first? The currency or the bank? You can have currency without a bank, but you definately can't have a bank without a currency.

I know I've pointed this out to you before, but....

Community Reinvestment Act - Wikipedia, the free encyclopedia

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

regulation in the Financial Markets is incredibly tricky. In 1977, people decided it wasn't fair to discriminate based upon creditworthiness (imagine that). The government made it illegal to selectively pick one individual over another for loanmaking purposes based squarely on income. I seriously don't know what they were thinknig, but banks had to come up with credit policies, which we still have today outlining other criteria to try keep away from making bad loans, but sometimes we are forced to, b/c of federal law. Then in 1995 it was decided and signed into law by president clinton that these could be securitized (subprime market).

After the great depression we learned as a society that taking demand deposits and using them in high risk securities can be bad. If you lose the money you lose people's money who didn't even realize there money was being used for high risk securities. Part of what the Gramm-Leach-Bliley Act did was free up some of those regulations. BTW imo the bill as a whole wasn't terrible it just left us open for some major risks. This was signed into law by Bill Clinton in his second term. The short term effect was tons of new cash that could be invested that couldnt previously which was a huge boon to our economy. This act in addition to the Community Reinvestment Act was a shitstorm waiting to happen.

Put this together we can get a pretty nice timeline.

1977 - Many home purchases made by less than creditworthy individuals by law.

1995 - Securitization of those loans. Banks can now sell these loans to investors.

1999 - Banks or other investment institutions can now use demand deposit funds (savings accounts, CDs, money markets) to buy high risk assets.

You swirl all this shit together you get a neopolitan dumb of financial proportions.

Bailing out these institutions in the long run save individuals jobs, money, complete anarchy to the likes that we don't even know.

I personally feel no need to bail out individuals. Most of them, of their own accord to on to much risk, using them as an investment tool. The difference I see between the 2 is the institution many times were forced to make the loan through law in addition to using peoples funds that are probably the same people you want to bail out, whereas the individual on their own volition bought a home they probably couldnt afford in the first place.

I think people forget that people not being able to make their payment started this. If a 1% jump in prime is going to effect your ability to make your house payment you shouldnt own that home.

TBH if a 10% increase makes it not possible for you to own your home you shouldnt own it.

EDIT - BTW if i sound like im not a fan of clinton, when it comes to some of his economic conditions you would be right. I honestly feel like he was given a bunch of wood and was told "this is gonna keep you warm over the winter" and then lit a bonfire. It was pretty fucking cold afterward.

icKx

I hate to disagree with that pointed Gary Larson cartoon, but you're actually on to something. Welcome to the corporate welfare-state.

The problem isn't that the government helps keep these institutions afloat for the sake of avoiding a 'domino effect' or other economic disaster but how they go about doing it - by writing these companies a no strings attached blank check.

Economist and author Dean Baker is someone you should check out if you're interested in this kind of thing. He writes some great columns.

Like these:
Bush and Congress Want to Raise Your Taxes to Help out Fannie and Freddie's Management and Shareholders

Making the Bank Bailout Fun

What Happened to "Free Market" Conservatives (or Neo-Liberals)?

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Krontak

Yes, it does seem unfair. I understand there the banks needed to get bailed out. But, this attitude of, oh lets let the markets take care of themselves suddenly turns to panic when a bank is about to go under. Where was the panic when the consumer started to go under?

Krontak

I don't think either of the candidates is going to touch regulation with a ten foot pole until they are in office.

I'd like to get more regulation back into the markets to prevent these ridiculous bubbles to which private investment firms and banks are not subject to any consequence but the consumer gets left on the curb to deal with it on their own.

Widem

Krontak,

Somewhere between my 2nd and 3rd set of my rope pulldown it dawned on me another way to explain this as simply as possible as it pertains to what you perceive as "bailout inequalities".

As it pertains to this situation, all home are bought off of credit. IE a home loan. An individual, family, investor, etc. decides to purchase a $200k home. Most people do not have $200k lying around to they borrow the money from the myriad of lending institutions.

Here is basically what occurs:

-Borrower applies for $200k loan.
-Lender issues $200k in funds to be xfered to borrowers account for the purposes of paying for the home.
-Repayment terms are carried out in the form of monthly payments. and a first deed of trust contigent on repayment is issued on the property/facility.

The facility is now the sole ownership of the borrower, yet is leveraged through the lender.

If repayment cannot be acheived who is at a loss?

The bank loses out on whatever cannot be collected through the sale of the home.

The point is any bailout as it pertains to consumers would be giving free money based upon lack of a collateral position b/c well they don't own the collateral, whereas a bailout for an institution occurs as a result of a GAP in a collateral position.

Another way of putting it is a home that is forclosed on as it pertains to the consumer results in no loss of money, whereas from a bank it does.

Krontak

...and the bailout has begun.

U.S. Near Deal on Fannie, Freddie - WSJ.com

Can't wait to see how large of a bailout this is. All the fucking chairmen of the boards of these companies need to have their pay cut to $1,000,000 and let them earn their ridiculous salaries for a change rather than voting each other massive pay increases.

Its a fucking scam. These guys took chances, they should be equally responsible. But I'll tell you what will really happen. They'll get bailed out, continue to get paid crazy salaries and insane bonuses, for gambling and loosing the bet on the housing market and risky loans to risky clients, while the consumer bares the brunt of the collapse.

Where is the shared burden of this housing crash that was partially created by the prime interest rates being held so low for so long?

Daedalus

Dude, what makes you think that large-scale, professional bankers haven't always been crazy rich?