Bush regurgitated in his speech last night what we all have been hearing for the past week or so: If we don't bail out the large financial institutions who have over-invested in mortgage-backed securities, they are going down the toilet. I am not an economist or financial analyst, but I understand that part. However, a couple of things are not clear to me. There is not a lot of analysis below, but I am hoping someone with a lot more knowledge than me about the current situation with the economy can jump in and clear things up:
Here's what Bush said will ultimately happen with no bailout:
More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.
And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.
Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.
That sounds painful, but he doesn't say millions will lose jobs, just "could". He doesn't say it would be impossible to get car and college loans, just "more difficult". And why couldn't you just keep driving the car you already have? "Foreclosures would rise dramatically"--why? I understand, but don't agree, that the banks might be reluctant to make new loans, but why would they aggressively foreclose? Because the "millions" of new jobless people aren't paying their mortgages? Is everybody going to lose their job? Bush's gloomy scenario does not sound to me like a catastrophe, like the kind of thing I want to pay even $2,500 to correct. It sounds like I'm just going to be out $2,500 I will need in Bush's future-with-no-bailout.
The fundamental problem I have with the doomsday scenario is this: despite the fact that I have read many newspaper and magazine articles on the "crisis", despite hearing the "explanations" of the talking heads and politicians, I do not see the path from Wall Street's problems to catastrophe for the average American. None of those sources has explained, at least to my understanding, how and why the financial survival of my family, friends and neighbors is so critically intertwined with the financial survival of some Wall Street companies. Let me be clear that I'm not saying there will be no adverse affect of no bailout, I just don't see why and how there will be a catastrophe and, if so, why and how it will destroy my life, to the extent that the "catastrophe" must be cured with the bailout.
Why do we, individually and collectively, go down the toilet with the tanking financial institutions and the geniuses that run them (hereinafter "assclowns")? How does that work? Bush said in his speech that "Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up[.]" Two points: he didn't say "all" banks are in trouble, and he didn't say they couldn't lend money, he just that the ones in trouble "began holding on to their money." So the problem is that solvent banks don't want to give these failing institutions any more money. So what?
In the next breath he said that Americans with good jobs and good credit ratings will find it difficult to get credit to buy cars to put their kids through college. How does that necessarily follow? I understand that if there's a symbiotic connection between Joe Main Street and Assclown Wall Street, people will be unable to buy things on credit and fewer things will get sold, causing sellers to have financial problems, and if enough people aren't buying things the economy tanks. But where's the connection between the assclowns tanking and us tanking?
It seems to me that if solvent banks aren't lending shitloads of money to assclowns, they've got more to lend to good credit risks. Banks make money off lending to good credit risks. Why and how would Lehman going down the tubes keep my bank from lending me money, thereby making money off me, assuming I'm a good credit risk, i.e. not a Lehman employee? Is it just the loan manager's generalized fear that the economy is going to tank and everybody's going to lose their jobs and assets? How does the bank gain by doing nothing? What would the banks be waiting for before they start lending again?
Another thing that's not clear: If the people running the big banks, who know a lot more about it than we do, don't want to throw good money after bad, why should the Prez and Congress throw 700 bil of our tax dollars at the assclowns the banks don't want to deal with?
I suspect, but don't know, that the answer is implied by the question: if those who know what they're doing don't want to invest, those that want to invest don't know what they're doing.
Sure, there are people who invested with the assclowns, and they will lose money. Companies and local and state governments have invested retirement funds with them and those have been hit hard. Innocent people have and will be hurt if there's no bailout. But that's not the rationale being pimped now for the bailout. The rationale is that we'll have another Great Depression (I know, Bush said "recession"--he was trying not to scare us) if we don't do the bailout. The rationale now is that everyone is screwed without the bailout. The talking heads and politicians say that will happen, but what's the mechanism--they don't explain that.
Bottom line--how do we all wind up getting flushed down the toilet with the assclowns if there's no bailout? What is the process? How does 700 billion dollars short circuit the process?
So somebody out there please explain the connection, other than our tax dollars, between us and the assclowns. How and why we go down the toilet with the assclowns.
Or if you can explain why there is no connection, please do so.
Or sympathize if you're in the dark on this too, and please post that. Ignorance loves company.