What if no bailout happens?

[Polgara]

How many retirees know the salaries of top management in all the companies in their mutual funds' portfolios? Should everyone with a savings account have to figure out where the bank is investing their savings and whether or not those investments are in companies with dishonest management?

Well, in today's world you can do a lot of that for yourself. You can take personal responsibility in surrounding yourself with people with the right kind of knowledge. You can google. Information is at everyone's fingertips.

You can vote out the morons who are supposed to be in charge of regulation, and who do not do the job of protecting us from this kind of crap.

You can go on sights like this one and weed through information and possible considerations.

There should be regulation and accountablity, however. No one person can know everything, especially when there is hidden shenanigans in corporations, banks, businesses, etc. I'll not debate that. But everyone has a responsibility, and if they exercised that responsibility they'd find themselves in a lot less jeopardy.

A retiree has more time than I do to find out where their money is, who is in charge of their money, etc. I run a business, have a son still home, go to college and work consulting on the side. I'm a single parent now. I started and ran my own businesses for 15 years and grossed over $250k with half my brain tied behind my back. I lost it all to a husband who gambled like a crack addict. I am broker than broke. I've been wrestling a serious illness for two years. I still find time to know what's going on around me, with my money, with the stock market, with the job market, etc.

I'm not against your view above, I'm just saying that people do have the means, for the most part, to know what's going on, or what is likely to transpire. The banking problems, the credit problems, the housing market problems, Fannie and Freddie problems...were not all secrets that just hit us out of the blue. Nor are these financial problems entirely new in our world.

 

[skepticalbeliever]

They better pass the bail out soon or we'll have a great depression. Banks must be able to function. There isn't room for ideology on this debate as far as I'm concerned. Pass it or the economey implodes.

 

[ZenFountain]

Banks explode. Businesses cannot borrow money to cover short term expenses. For no reason at all besides the lack of short term credit, vast numbers of business fail, have layoffs, cut expenses drastically or at best cannot expand operations when by all rights they should be.

But hell, let's have another great depression to prove two points. One that if you give them enough rope they will hang themselves and two, congressmen will do anything to get elected. That's really all it boils down to.

 

[Prometheus]

Well, in today's world you can do a lot of that for yourself. You can take personal responsibility in surrounding yourself with people with the right kind of knowledge. You can google. Information is at everyone's fingertips.

You can vote out the morons who are supposed to be in charge of regulation, and who do not do the job of protecting us from this kind of crap.

You can go on sights like this one and weed through information and possible considerations.

There should be regulation and accountablity, however. No one person can know everything, especially when there is hidden shenanigans in corporations, banks, businesses, etc. I'll not debate that. But everyone has a responsibility, and if they exercised that responsibility they'd find themselves in a lot less jeopardy.

A retiree has more time than I do to find out where their money is, who is in charge of their money, etc. I run a business, have a son still home, go to college and work consulting on the side. I'm a single parent now. I started and ran my own businesses for 15 years and grossed over $250k with half my brain tied behind my back. I lost it all to a husband who gambled like a crack addict. I am broker than broke. I've been wrestling a serious illness for two years. I still find time to know what's going on around me, with my money, with the stock market, with the job market, etc.

I'm not against your view above, I'm just saying that people do have the means, for the most part, to know what's going on, or what is likely to transpire. The banking problems, the credit problems, the housing market problems, Fannie and Freddie problems...were not all secrets that just hit us out of the blue. Nor are these financial problems entirely new in our world.

I'm not at all suggesting that all that information isn't available to those who go looking for it. I am suggesting that most don't bother and it's silly to expect them to. There are also alot of people who don't have the ability, for one reason or another, to keep abreast of their finances.

In addition to my day job, I work part-time as an adult basic education teacher. Many of my students are unable to read or do arithmetic beyond the fourth grade level. Yet they have homes and jobs and families to support and retirement accounts. They don't have a clue what's being done with their money, and they couldn't understand the very basics of it even if they wanted to. Should they be unable to count on the safety of their savings or the possibility of retirement because they don't have the wherewithal to hold mutual fund managers and top executives accountable for their misdeeds?

As a business person, you necessarily have an awareness of finance and management probably quite a bit beyond what most people can manage, and I think it's unfair to hold everyone else to the same standard that you are capable of.

 

[Travis]

Well, in today's world you can do a lot of that for yourself. You can take personal responsibility in surrounding yourself with people with the right kind of knowledge. You can google. Information is at everyone's fingertips.

You can vote out the morons who are supposed to be in charge of regulation, and who do not do the job of protecting us from this kind of crap.

You can go on sights like this one and weed through information and possible considerations.

There should be regulation and accountablity, however. No one person can know everything, especially when there is hidden shenanigans in corporations, banks, businesses, etc. I'll not debate that. But everyone has a responsibility, and if they exercised that responsibility they'd find themselves in a lot less jeopardy.

A retiree has more time than I do to find out where their money is, who is in charge of their money, etc. I run a business, have a son still home, go to college and work consulting on the side. I'm a single parent now. I started and ran my own businesses for 15 years and grossed over $250k with half my brain tied behind my back. I lost it all to a husband who gambled like a crack addict. I am broker than broke. I've been wrestling a serious illness for two years. I still find time to know what's going on around me, with my money, with the stock market, with the job market, etc.

I'm not against your view above, I'm just saying that people do have the means, for the most part, to know what's going on, or what is likely to transpire. The banking problems, the credit problems, the housing market problems, Fannie and Freddie problems...were not all secrets that just hit us out of the blue. Nor are these financial problems entirely new in our world.

So a person is at fault if something bad happens to them and they don't know exactly how it happened or how to fix it? A person is responsible for their TV breaking because they should have taken technical courses on the workings of Plasma TV's and thoroughly take it apart and inspect it every day before turning it on?

 

[Tippit]

I'm sorry about you being hurt, but the fact remains: now is not the time to entertain the same pet theories about banking, and argue about basic concepts you can research by your own any time your want. We're facing a crisis (or if you don't like that word, a very significant event), and it's perfectly normal that people address it beyond macro-economics 101. I have a problem with people "polluting" important discussions with concerns and comments that are simply not recognized by the vast majority of experts in economy and finance, especially when they claim they actually know what they are talking about. This is not the time for free-wheeling discussions.

Actually, now is perhaps the most important time to discuss what the root cause of this problem is. People have this tendency not to listen during the boom cycle.

 

[Tippit]

They better pass the bail out soon or we'll have a great depression. Banks must be able to function. There isn't room for ideology on this debate as far as I'm concerned. Pass it or the economey implodes.

It's going to implode anyway. More easy money will simply prolong the recession/depression. There is no money to pay for this bailout, and we're running out of foreign creditors.

 

[Francesca R]

Bailout happened anyway.

That's not a bailout, unless borrowers default to the Fed, in which case it still isn't a bailout, any more than any creditor of a failing firm getting stiffed is them bailing that firm's other creditors out a bit.

 

[Francesca R]

They better pass the bail out soon or we'll have a great depression. Banks must be able to function. There isn't room for ideology on this debate as far as I'm concerned. Pass it or the economey implodes.

let's have another great depression

Lots of people fear this, but they don't really know. It's a live experiment, like it or not.

They're afraid that a generalised collapse of the ability to borrow and lend money will happen, which will stop non-financial companies from being able to run their businesses, and that the large fall in wealth and the value of savings (perhaps augmented by bank runs) might produce a catastrophic drop in demand on main-street World.

If that belief, or something approximating it, was correct--then the average taxpayer would face lower taxes, and higher living standards over the long run if the government utilises taxpayer-funded bailouts than if the government permitted the collapse of the financial system under the doctrine of a "bailouts are bad" principle. So it would be justified on utilitarian social welfare grounds.

In all honestly, nobody knows exactly what will or would happen and it is probably impossible to take a strong position on this, and one who does probably does not know what they are talking about. And there are moral hazards involved. [In fact--there is a view that the Fed/Treasury in the US has been too keen to avoid moral hazard and have punished shareholders (of Fannie, Freddie, Lehmans and AIG) excessively, with the result that "everybody knows that equity holders will lose everything", so the panic selling is accordingly fuelled.]

 

[Francesca R]

So a person is at fault if something bad happens to them and they don't know exactly how it happened or how to fix it? A person is responsible for their TV breaking because they should have taken technical courses on the workings of Plasma TV's and thoroughly take it apart and inspect it every day before turning it on?

I don't really get this analogy, but if you are not covered by statutory consumer rights, and have not insured a product, then you alone are liable for the cost of it breaking, yes.

 

[Polgara]

So a person is at fault if something bad happens to them and they don't know exactly how it happened or how to fix it? A person is responsible for their TV breaking because they should have taken technical courses on the workings of Plasma TV's and thoroughly take it apart and inspect it every day before turning it on?

Nope.

I'm not suggesting that every single person is totally responsible for every single thing.

 

[Polgara]

I'm not at all suggesting that all that information isn't available to those who go looking for it. I am suggesting that most don't bother and it's silly to expect them to. There are also alot of people who don't have the ability, for one reason or another, to keep abreast of their finances.

In addition to my day job, I work part-time as an adult basic education teacher. Many of my students are unable to read or do arithmetic beyond the fourth grade level. Yet they have homes and jobs and families to support and retirement accounts. They don't have a clue what's being done with their money, and they couldn't understand the very basics of it even if they wanted to. Should they be unable to count on the safety of their savings or the possibility of retirement because they don't have the wherewithal to hold mutual fund managers and top executives accountable for their misdeeds?

As a business person, you necessarily have an awareness of finance and management probably quite a bit beyond what most people can manage, and I think it's unfair to hold everyone else to the same standard that you are capable of.

Hmm. For the record, I'm not being a militant hard ass on this topic. Having said that:

I don't expect anyone to understand or learn everything about their banking institution, insurance companies, TV's as listed below, etc. I also don't expect to have to pay for the woes of people who do not pay attention, nor do I expect to have to pay for the crap behavior of either the government not enforcing/keeping a tight eye on regulation or the institutions playing bs.

If a person doesn't have the training or education to learn about the above mentioned things, they do have the capacity to seek out those who are in the know, and who can be trusted to teach them or to educate them enough.

HOWEVER, the government and the various above mentioned institutions DO have a responsibility as well. They SHOULD be held accountable. They should be in jail a/o paying out of their own pockets...when they act deceptively or they act without ethics, perhaps without morals and against what they advertise a/o display to the public.

I am not the most intelligent in the land, although I am not stupid by any stretch. I have only had a high school education, until recently. I do well, and have learned the things that I know because I sought the means to do these things. I've studied on my own accord, without credits from institutions as the driving force for doing said. I've unabashedly picked the brains of the intellectuals around me. I keep my mind open to remembering the fact that I am not the most intelligent in the land, so that I don't lock myself into a box. Almost everyone can do the same thing, if the balance of how they do it needs to vary according to intellectual capacity.

I don't hold everyone to the same standard, btw. I'm just suggesting that if one is worried about their finances, insurance coverage, credit....they need to rely upon themselves and not just the government or the institution with which they are dealing.

All parties need to be responsible.

 

[Francesca R]

I'm just suggesting that if one is worried about their finances, insurance coverage, credit....they need to rely upon themselves and not just the government or the institution with which they are dealing.

All parties need to be responsible.

Deposit insurance is an exception to this. Effectively, governments that set up depo insurance acknowledge that "caveat emptor" is not a socially desirable principle for the public saving money in a bank account, and that the public is not expected to estimate the risk of a bank failing before lending to it.

The gap in this social contract is of course that no government protects its citizens deposit base in its entirety.

 

[Polgara]

Deposit insurance is an exception to this. Effectively, governments that set up depos insurance acknowledge that "caveat emptor" is not a socially desirable principle for the public saving money in a bank account, and that the public is not expected to estimate the risk of a bank failing before lending to it.

The gap in this social contract is of course that no government protects its citizens deposit base in its entirety.

FDIC ultimately equals a joke. This is sad, but true. Just to name one obvious reason is the 99 year payback, etc.

I preach this to anyone who listens or broaches the topic. a) Do you -really- trust the Federal Govt. to pay your money to you? b) 99 year payback with no guarantees of when or how...your money will be given to you. c) In talking with people I know, we've read and discussed people who are currently up in arms because they've only received 50% payment on their missing money, with no idea when or how the other 50% is coming. That's now, imagine if the poo really hits the fan and there are hundreds of thousands of people waiting for the FDIC to pay them their money. -I'm sure I needn't elaborate on this.

I learned much when I had my Securities license.

 

[IllegalArgument]

Polgara, I'm still waiting for an specific example of someone who did not get their money back from the FDIC.

 

[WildCat]

FDIC promises your money back within 99 years. Already, some people that lost money here in the states have stated they've received only 50% of their money back through FDIC with no clear payment for the remaining 50% in sight...

It must be true if the chain email said so!

 

[Travis]

I don't really get this analogy, but if you are not covered by statutory consumer rights, and have not insured a product, then you alone are liable for the cost of it breaking, yes.

It was not the best analogy as my brain was kinda in screensaver mode or something.

Nope.

I'm not suggesting that every single person is totally responsible for every single thing.

But if someone had their retirement fund being handled by retirement fund "experts" it's their fault that the Fund is wiped out when the Dow collapses from a major recession caused by the simultaneous collapse of multiple financial institutions that they didn't even have anything to do with? I'm sorry but if you had some way to prevent that and you didn't just because you wanted to send some message then I have to wonder about your ethics/principles.

 

[Polgara]

Polgara, I'm still waiting for an specific example of someone who did not get their money back from the FDIC.

I didn't know there was a request in for an example. Will provide when I get back in from the road. Work duties, beckon at the moment. NP

 

[rjwould]

Congress is already back in negotiations and the media has been doing their part scaring the daylights out of the public in order to get voters behind the new version.

Hopefully it won't work.

 

[Polgara]

It was not the best analogy as my brain was kinda in screensaver mode or something.



But if someone had their retirement fund being handled by retirement fund "experts" it's their fault that the Fund is wiped out when the Dow collapses from a major recession caused by the simultaneous collapse of multiple financial institutions that they didn't even have anything to do with? I'm sorry but if you had some way to prevent that and you didn't just because you wanted to send some message then I have to wonder about your ethics/principles.

I'm pretty sure I'm missing the gist of what you are saying and asking.

These problems, like a collapse or recession, are not solely any one person or entity's fault. I think it's outrageous that these situations with financial institutions and lack of proper government regulation exist. I believe that the perps in these various institutions shoulder the greatest burden of responsibility. Crap happens, however, for a myriad of reasons. I am not suggesting it is the 'retired persons' fault, entirely. I am suggestion that it is that person's responsibility to do what they can to ensure the best path and outcome re: their money and investments and debt management. If you see all of the warning signs re: banks, debts, housing market, etc. and you don't reposition yourself or check with your 'expert', etc., then -you- don't. I did.

Here's where I am lost. "I'm sorry but if you had some way to prevent that and you didn't just because you wanted to send some message then I have to wonder about your ethics/principles."

Is the 'you' referring to me? And are you saying that if I don't say endorse the bail out, that I do not have good ethics/principles? Or that if I am discussing the fact that all parties have responsibility in this mess, I am somehow remiss? And are you saying that because of my viewpoints towards not being for the bail out and people assuming responsibility that somehow I am satisfied with people's losses just to send some message? Further, if the above questions are applicable, what message is it that I am sending that seems so offensive?

If you clarify, I will discuss.