Rather than letting the market operate, and permit AIG to file bankruptcy, the government steps in again: with our money.
AP : Government steps in again, bails out AIG with $85B
The decision to help AIG marked a reversal for the government from the weekend, when it refused to use taxpayer money to bail out Lehman Brothers Holdings Inc. Lehman, which filed for bankruptcy protection Monday, collapsed under the weight of mounting losses related to its real estate holdings.
The White House said it backed the Fed’s decision Tuesday.
“These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy, “ White House spokesman Tony Fratto said.
After meeting with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke in a late-night briefing on Capitol Hill, Congressional leaders said they understood the need for the bailout.
Meanwhile, C. Edmund Wright at American Thinker wrote:
Do not get swayed by the taxpayer protection arguments against this move. As a taxpyer, and a home owner, this is a win on balance. It will help the value of homes and it may or may not cost the taxpayer. The Chrysler take over decades ago actually ended up benefitting [sic] the taxpayers.
Are you wondering WHO is to blame for this nightmare? The economically illiterate imbeciles in our Democrat Party. Wright explains:
Many of the so-called “creative mortgages” were designed in response to politically correct and racially motivate legislation demanding that lenders have more minorities in their customer portfolio. Again, this was not something that came from the right side of the aisle.
And all of this came crashing down as the oil markets soared and people in the sub prime market had to choose between groceries, gas or mortgage payments. More liberal policies at work when you look at our energy situation over the past 30 years of course. Choosing to pay the former, these defaulting mortgages jump-started the mortgage-housing meltdown. These problems were the worst, of course, in liberal-controlled states like Michigan and California where government has driven businesses away and taxes up. And the result has been a cascading down of home values, bank failures and more deterioration of millions of 401K plans. It’s no wonder that Dick Armey says that “economic illiteracy” is required to join the Democrat caucus in Congress.
Thomas Sowell notes that this mess stems not only from the government but the mindless bleeding hearts in the American media:
It was not that many years ago when there was moral outrage ringing throughout the media because lenders were reluctant to lend in certain neighborhoods and because banks did not approve mortgage loan applications from blacks as often as they approved mortgage loan applications from whites.
All this was an opening salvo in a campaign to get Congress to pass laws forcing lenders to lend to people they would not otherwise lend to and in places where they would not otherwise put their money.
The practice of not lending in some neighborhoods was demonized as “redlining” and the fact that minority applicants were approved for mortgages only 72 percent of the time, while whites were approved 89 percent, was called “overwhelming” evidence of discrimination by the Washington Post.
Some people are more easily overwhelmed than others, especially when they find statistics that seem to fit their preconceptions. But if we do what politicians and the media seldom bother to do— stop and think— an entirely different picture emerges.
In our own personal lives, common sense leads us to avoid some neighborhoods. If you want to call that “redlining,” so be it. But places where it is dangerous to go are often also places where it is dangerous to send your money.
As for racial differences in mortgage loan application approval rates, that does not tell you much if you are comparing apples and oranges. Income, credit history and net worth are just some of the things that are very different from one group to another.
More important, in the same ways that blacks differ from whites, whites differ from Asian Americans. The fact that whites are turned down for conventional mortgage loans, and resort to subprime loans, more often than Asian Americans do is seldom reported in “news” stories about lending practices, even though such data are readily available.
Shocking as it may be to some, lenders are in the business of making money, and they don’t much care whose money it is, so long as they get paid. Politicians, on the other hand, are in the business of getting votes, and they don’t much care whose votes it is— or what they have to say or do in order to get those votes.
It was government intervention in the financial markets, which is now supposed to save the situation, that created the problem in the first place.
Laws and regulations pressured lending institutions to lend to people that they were not lending to, given the economic realities. The Community Reinvestment Act forced them to lend in places where they did not want to send their money, and where neither they nor the politicians wanted to walk.
Now that this whole situation has blown up in everybody’s face, the government intervention that brought on this disaster in is supposed to save the day.
Sowell explains it in another way:
How did the government help create the current financial mess? Let me count the ways.
In addition to federal laws that pressure lenders to lend to people they would not otherwise lend to, and in places where they would otherwise not invest, state and local governments have in various parts of the country so severely restricted building as to lead to skyrocketing housing prices, which in turn have led many people to resort to “creative financing” in order to buy these artificially more expensive homes.
Meanwhile, the Federal Reserve System brought interest rates down to such low levels that “creative financing” with interest-only mortgage loans enabled people to buy houses that they could not otherwise afford.
But there is no free lunch. Interest-only loans do not continue indefinitely. After a few years, such mortgage loans typically require the borrower to begin paying back some of the principal, which means that the monthly mortgage payments will begin to rise.
Filed under: The Government Engineered Mortgage Crisis , liberals, economy, Democrats, free market, taxes, mortgages, AIG, government bailout, taxpayer, economics, minorities, intervention, Community Reinvestment Act
Why is it that our nation’s leaders are allocating our tax dollars to a non-governmental entity to bailout a company most of us could care less about? Since when does failure to operate a business properly merit the pity and hard-earned dollars of American citizens? I know of hundreds of business owners who have made mistakes in running their business; and not only does no one come to their aid one iota, but because they are self-employed business owners, even in a crisis they are unable to get access to simple financial benefits such as food stamps or Medicaid (that even illegal immigrants can get) when necessary!