In your opinion, is this economist correct in his assessment that bankruptcy is better than a bailout?

Hmmm . . . I feel a long, rambling post coming on. Here is my answer to your question:

I wholeheartedly agree that government policies caused this crisis. The videos of hearings where Republicans are trying to get to the bottom of the problems and the Democrats are insinuating racism are immediately apparent. Why McCain has not been making more of this I'll never know. I thought he wanted to win!

So we are where we are. And I think the Democrats have no one but themselves to blame for losing the vote on Monday. After years, if not decades, of decrying "corporate welfare," "trickle down economics" and "tax cuts for the rich," how can they say that this is a great bill and then blame the Republicans for being ignorant to vote it down? Many Democrats voted "no" also.

Here's what I would do, when and if I am installed as dictator (LOL!): I would approve of legislation that allows the government to PURCHASE these loan assets, and the properties on which they are based, to hold for eventual resale at a profit. I would also make re-regulation of credit part of the deal. I would re-introduce the novel idea that ONLY PEOPLE WHO CAN AFFORD LOANS ARE GIVEN LOANS. And I would review some other applicable SEC, accounting and banking rules as well, to eliminate the perverse incentives that created this crisis and lessen the impact of any "moral hazard." I would NOT fund ACORN or pet "green" projects in such a bill.

Here's what the Democrats will do, if given the chance: continue to demagogue populist and race-baiting themes to get votes ("the Republicans don't want people of color to own houses"), continue taking huge contributions and lucrative jobs from many of these corporate entities, and blame the Republicans for everything. They will also take advantage of any economic turmoil, and perhaps even enhance it, to get Obama elected. They will then "fix" the things that were right about the financial system, and leave broken the things that were wrong. The economy will then tank further, and unless the Republicans finally grow a spine (you know, like those two weeks after Palin was nominated), the Democrats (with the help of the media) will use the bigger mess they have created to say they need even more control of the government and the economy, and the voters will give it to them. Hey, it worked for FDR!

No one is considering letting the banks go bankrupt because there is a serious risk of credit tightening up, putting the economy into a real tailspin. But there's a toxic political context in which this is all taking place that prevents worthwhile debate, much less a rational legislative response to the situation, from occurring.

Sorry to be a downer. But I've been here before. I actually was a volunteer for the Carter campaign in 1976 and the parallels between him and Obama are frightening. (Then again, Carter wasn't fond of crushing the First Amendment as Obama appears to be. So much for "dissent being patriotic.") I learned my lesson, eventually; I fear this new generation has not. And with our enemies working furiously to obtain nukes, maybe a lot of this won't matter much anyway.

I'm glad I'm not a younger man. <sigh>

PS Take this screed with a grain of salt. I work in the financial industry and will probably be out of work. But I've been there before. And when I get very discouraged I do take comfort in the fact that our side is eager to call upon God for His blessing and guidance while the other side prefers to mock and deny Him. Not that we have God on our side, or that He always tells us what we want to hear. But we do ask, and listen.

Take care.

PPS The more I hear about this, the more I see that many people I respect are against the bailout plan. So in the end I don't know just what to do. I am not too sure that anyone does. We may disagree on details - this plan, or any plan, among them - but I think we share the same general principle: that the government caused this mess in large part, and that free-market economics, not more government, is the long-term solution.

So you're saying 'let the markets clear'.

I agree, but also understand that our economy is built on the consumer. Also, letting a bank fail pushes deposits onto the FDIC. The FDIC has nowhere near the amount of capital needed to cover a portion of a systemic banking failure, which is what would happen.

Many small businesses, and medium and large, run their day-to-day operations on LOC's. Those will go away completely. This will drive rampant unemployment and a recession.

If not for these issues, I'm all for a 'hands off' approach.

If the adverse effect of the crisis could be contained and experienced by only those borrowers and lenders who engaged in this nonsense, then OK... But it can't be contained. The bad loans are woven into the fabric of the economic system and the result hurts everyone, and it could hurt everyone rather severely. Just because some guy blind sides me through no fault of my own does not mean I'm not going to take steps to stop the bleeding.

First off, I believe he has reversed the dates of inception for Freddie and Fannie. Will double check that. Secondly, it really does no good to sit here and discuss what led us to this point right now. There will certainly be time for that, and I think all responsible parties should be hung out to dry. But right now is the time to act before we hit crisis mode. Under normal conditions, I am all about letting failing companies fail. Bankruptcy is an option for a reason. But these are not normal conditions. The situation here is that the companies currently failing happen to represent a MAJOR sector of our nation's entire economy. And if they fail, that means no credit will be available or extended to ANYONE. Not just individuals, but companies, which rely on credit to function - to pay their employees, to buy goods and services, etc. That's why bankruptcy is not being considered in this instance.

I would think that this is exactly what should be done. Those currently responsible for this mess are the same ones who are going to be back in charge of all this money.

Let's see, put the fox in the hen house the first time, and when you put new chickens in there, you want to put the same fox back in the second time? Yep, seems sound to me! Right!

I would think that any restructuring of these organizations should begin with the removal and possible charges filed against those who were primarily responsible.

I know that if I were to ask a bank for a loan, they would want to know what I ate at Emrile's 18 months ago and exactly how it was cooked and the waiter's name.

Should we the people be demanding the same from our representatives?

AS ALWAYS, THE Taxpayer is the one which holds the bag and gets srewed. there will be no trial or any other punishment for these criminals this did happened before and it will happen again

one part of the problem is: all the politicians should be on a term limit

this way they can not get to cushy with lobby and others

I agree with him. Bankruptcy would then let the banks write off the debt, it would free up money from federally insured deposits to be loaned on qualified loans, and the economy would recover rather swiftly, it would hurt while the banks were in bankruptcy proceedings, but shortly after it would rebound with vigor, and the foreign investment banks holding hedge fund money would go under.

I agree completely. Somewhere in this bailout I'd like to see a phase out out of Fanni & Freddie.

Yes. The sales of 'recourse paper' to buyers stupid enough to purchase that paper 'without recourse' is a 'buyer beware' not a legitimate taxpayer bail-out issue. If the Senate votes in favor

thereof each senator so doing should be 'voted-out' of office.

I believe you are absolutely correct, and if more people would do the research to see how this happened, and what the consequences are of this bailout, they would be storming down the walls of both the Congress and the Senate.

It should not be considered for many reasons. It is written poorly, it gives great power to one person, and it is filled with pork, so that both parties will get something out of it.

Do we really want the government to have so much power?

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