#1 Could Bankruptcy, not bailout, be the answer?
09-30-2008, 04:56 PM
- Join Date
- May 2008
- The West
I'm trying to educate myself on economics, and what's really happening in our current crisis, before I come to any conclusions on what I, as a citizen, believe is the right course of action. Unfortunately it is an election year and you can't really trust either party to be truthful, heck, when can you trust politicians to be truthful?
Anyway, I came to this article via Drudge. What do you all think? I'd like to hear from CW, Owl or the others on this site with a financial background. Some key points on why the bailout might not be the answer:
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.
Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.
The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.
Last edited by Lager; 09-30-2008 at 04:57 PM. Reason: typos
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