Soooo..... is DREAM just a dream? - Page 2

Ahhh, but that is exactly what led us to this recession in the first place, my friend. In fact, deregulation is the official cause of the crisis according to the IMF.

This isn’t anything new, though. Republicans have espoused this belief for years. Back in the thirties Treasury Secretary Mellon, a Republican economist, was one of the most adamant supporters of ‘laissez-faire’. So when the Great Depression struck, Hoover had the chance to prove the efficiency of the theory as a way to deal with an economic crisis (along with some minor monetary policy adjustments), and as history shows – it failed horribly. Of course Hoover got his ass replaced by a “socialist” Democrat who, through the use of fiscal policy (much like Obama), pretty much restored the economy to a healthy state.

Now, letting everyone fail is simply not a realistic option. Unlike other recessions, this time we’ve lost the most amount of household wealth ever, mainly in the form of stock prices and home values. The losses amount to approximately 15 trillion dollars, or 75% of the GDP, which means that we’re pretty much out of cash. If we allow, say, AIG to fail it would be like the current situation times ten worse (since we DID let Lehman’s fail and they were only about 10% the size of AIG). That’s not the worst part. When a financial institution such as Lehman Brothers or AIG or Citibank fails, there’s this thing called the FDIC, which has to step in and pick up the pieces and pay everyone for their losses. Guess who funds the FDIC? Yep, that would be us, and since we’re out of cash let's just say it's not the best time to be paying out trillions of dollars and getting absolutely nothing in return.

I agree with you that the stimulus package was not a good idea, because it was too small!!! Granted, if Republicans were bitching and moaning about 700 measly billion dollars, and ultimately only three “traitors” voted for it, a stimulus package in the trillions would have given them a heart attack (which is not such a bad idea if you think about it). The stimulus package was only meant to deal with the unemployment, so it certainly won’t solve the problem on its own. But you can rest assured that it was the best stimulus they could have passed given the Republican opposition.

The next step is a well-crafted financial rescue plan by Tim Geithner. In my view it should be much like the Swedish model which, in broad strokes, privatizes the banks, takes care of the toxic assets, splits them up into smaller self-efficient institutions, and sells them back to the private sector earning taxpayers money on the way. But of course the plan won’t be bold enough because in order to get one or two Republicans to vote for it they will have to water it down to the point where it’s not effective enough.

And that is why Republicans should be shot.

hahahahahahahaha

Well I know for a fact that Obama will take care of us!!! Maybe some of you are right and he won't be able to deliver everything promised (but then again, what prez. has?) so bottom line is, if he is going to do something about immigration, he's gonna start off with the Dream Act!!!

let me tell you something people politics is a huge ocean and more likely its a chess game. before they give any of us something they want their advantages and secure themselves at the same time. it might work out for us somehow but dont depend on it too much the game is still a game after all so my advice is make yourself strong for anything be prepared because all this obama talk might be true might not be so what you make out of yourself is worth a life time.

I agree with some posters

and disagree with others

I disagree with some posters

and agree with others.

What you have just described are the many negative consequences of deregulation: greed, bad business, poor management, along with unchecked overexpansion, risky investments, and the intentional creation of illiquid assets.

In fact, I think that there’s way too much misinformation floating around so let me start by giving you (and anyone else who’s completely lost) the cliff notes of how exactly we got to this recession:

It all started with what economists call macroeconomic imbalances. Basically, countries like China and India that were rich in savings and had no place to put their money decided that the safest place to invest was the US financial markets. This uncontrolled influx of foreign capital paired with Wall Street lies about cheap, diversified risks, as well as low interest money by the Fed led homebuilding companies to build and sell houses faster than flag pins at a McCain rally.

Then mortgage securitisers who were supposed to keep the risks of mortgage lending in check failed to do so. This is because they were more concerned with selling houses to unqualified buyers, and pass on mortgage debt to larger financial institutions.

When people began to default on their mortgages because of the unfair contracts by greedy mortgage companies like Fannie and Freddie, these companies and their investors’ stock began to deflate rapidly ($ 2 trillion lost). Recall that all the debt had been shifted around from bank to bank so when the losses began to materialize, it hit everyone in Wall Street. This is what we now know as the subprime mortgage crisis.

Unfortunately the problems, and mistakes, didn’t end there.

When the first institutions began to implode, Hank Paulson decided that letting some of them naturally fail was the right way to go (after all, he is a Republican who strongly believed in laissez-faire). Historians will probably judge that as the single most ill-guided mistake by the Bush administration.

In a matter of days, the decision of letting Lehman go down in flames caused the private sector to run away from other risky assets thus devaluating all financial institutions. When the dust settled, more than $32 trillion dollars had been lost by virtually every single bank rendering all of them insolvent.

When Paulson realized his mistake he panicked and urged congress to pass the first TARP which, as its name implies, was meant to eat up all the toxic assets. I think that the feeling of guilt blinded him from making a more rational decision such as following the Swedish model. Instead he essentially socialized the losses and privatized the gains. Now, while throwing money at the banks may not have been the best move, having let them fail would have had a similar devastating effect in the markets as the implosion of Lehman (paying $2 trillion will always beat paying $32 trillion). Not to mention that Bank of America or Citibank are ten times bigger than Lehman.

Notice how all of this could have been avoided had there been more regulations at every step of the way, making it harder for Wall Street to put the nation’s wealth at stake with such ease. I don’t think that India, China, or the misinformed home buyers are at blame because they didn’t know what was going on. It is politicians (Republicans) who failed to listen to the whistle-blowers who should be tried in a court of law for not having regulated the markets more heavily (in fact Bush fired the one guy in his administration who told him that the housing bubble would burst at any moment).

Whether it’s a war or deficit-financed spending, they’re both fiscal stimulus which have always proven effective. And by the way, it’s only as of recent that Republicans have begun arguing that the New Deal was ineffective. Remember that even Ronald Reagan (aka Jesus 2.0) boasted that he voted for FDR. Or that McCain’s economic advisors Holtz-Eakin and especially Mark Zandi advocated for Keynesian solutions –until he lost, now they’re totally anti. So again, don’t buy all the crap you hear from them on the news. Stimulus spending works no matter who or where it comes from.

The only people bitching about the spending are Republicans, which is kind of ironic given their culpability in the matter.

Actually we don’t, but if we were to socialize the banks –they can call it something less scary… temporary asset retention, bank daycare, whatever- we would not only own some equity in the banks, but also the gains, which is exactly what the Swedish model does.

Unemployment reached 25% during Hoover’s administration so we’re definitely far from that. Not that it can’t happen, it certainly could, but fortunately we have a Democratic-controlled government that would never let that happen.

Whenever you need to read honest reporting on the economy head over to Paul Krugman's blog. He would have made a great Treasury Secretary, but I doubt he would've been confirmed. He said so himself when Clinton wanted him
Also if you want a fair, conservative point of view check out former Bushie Greg Mankiw's blog (even he agrees with deficit-financed stimulus, though). They've been having a little back and forth about the aftermath effects of large fiscal stimuli that makes for a good read. (I think Mankiw's just jealous that he doesn't have a Nobel prize under his belt)