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Saturday, September 20, 2008

Bush Proposes $700 Billion Mortgage Bailout

...so how about some national service?

People call me crazy for advocating single-payer not-for-profit health coverage. People need to be responsible for their own medical bills, my conservative commenters tell me. Socialized medicine would bankrupt the country, fiscally and morally.

So wrap your head around this: President Bush is asking Congress to raise the national debt limit so we (yes, we, the taxpayers) can buy up "toxic" mortgages. Price tag: $700 billion.


Seven. Hundred. Billion. Dollars.

I'm still checking to see if I misread that. Nope: NYTimes, AFP,... $700 billion.

The cost of seven million houses like mine.

Hundreds of thousands of people bought more house than they needed, more house than they could afford. Hundreds of banks, smart folks with MBAs, ignored sensible lending procedures and extended credit to bad risks. And a Republican President calls on us to erase accountability and, in contravention of everything fiscal conservatives and Mom taught us, to eat something (in this case, debt) clearly labeled "toxic."

To make things worse, I think the Democrats in Congress will go along with it, tacking on some goodies rather than standing against bad fiscal policies.

$700 billion. That's over two years, so it's not as bad as it sounds [smirk]. But for perspective, here's how much President Bush asked to spend this fiscal year on various projects:
  • "Security" (Defense, Homeland, etc.): $553.9 billion
  • "Global War on Terror" supplement: $145.2 billion
  • Health & Human Services: $69.3 billion
  • Education: $56.0 billion
  • Veterans: $39.4 billion
  • NASA: $17.3 billion
We're about to spend more buying out bad mortgages than Bush was willing to spend chasing Osama this year. We're about to spend more bailing out foolish borrowers and lenders than we have spent on fifty years of space exploration. We're about to spend nine times more in one year to save the scurvy hides of sloppy bankers than we will on health care and other services for men and women who have faced bullets and bombs for their country.

Maybe we can't afford to sit on our hands (and our wallets). Maybe a general financial collapse and Depression would be worse practically than buying out the mortgage meatheads.

But for all the money we're spending to erase other people's mistakes, it's time we get something more in return than staving off a theoretical economic downturn. Let's get creative and combine these bail-outs with a national service program. I want some bankers over here mowing my lawn. Let's see AIG investors out shoveling snow for little old ladies. Let's see Bear Stearns brokers hauling garbage. Let's see the bankers and homeowners we rescue working off their debt by filling potholes and putting in 10 hours a week with Habitat for Humanity to build affordable houses.

When even Jimmy Kimmel can muster the brainpower to joke that the Bush Administration is turning to socialism, something is seriously out of whack. Talk about fiscal and moral bankruptcy: by my count, we're headed for a trillion dollars to buy out big business. At this rate, forget universal health care; we won't even be able to afford combat boots.


  1. As aggravating as the need to do this is, I have point out this money is not being spent for nothing. The vast majority of even the bad risk mortgages are going to be paid and for those that go into foreclosure, the properties will recoup most of the cost when they get re-sold. So in the end the bailout is not going to amount to anything like 700 Billion. It is a bailout and it does go against conservative principles. Sacrificing that principle in the face of a meltdown with potential to begin a 2nd Great Depression. I just hope the discounts the Fed gets for these mortgages is deep, very deep.

  2. I also hate to see this but since both sides of the aisle seem to favor this when presented with the actual facts of how this would impact the little people of this country, I think we probably have no choice. Before you bash one side or the other, there is enough blame to go around. Clinton signed the deregulation bill so don't blame the Reps. And McCain warned of this and called for oversight in 2005. And with luck we will recoup some of this money when the mortgages are paid.

    But, and here's another issue that will evidently cause the US to spend an equal amount to this bail-out, and we will not get any of that back, and that is Obama's legislation to give away US money in like amount to the UN for a global war on poverty. Our country doesn't have the money to save the world. We gave a lot already. We support the UN basically already. I just hope that Obama does NOT get elected and get a chance to throw more of our money away thru the corrupt UN. Obama thinks the US economy is a Christmas tree or a candy store and he can't wait to get his hands into our (my) bank account for his give away programs.

  3. Corey,
    After reading the entire column twice...I agree (did I just say that outloud?) Yes, I did. You are right on the money with this, personal financial responsibility should of been taken by the majority of those who got wrapped up in these high risk, ARM situations. I know the effect would of been widespread throughout, but in effect all they have accomplished is giving a few piece of mind at the expense of many. So, lets just agree....to agree, I guess. lol

  4. This bailout, like the others, is merely a stop-gap measure; like the other announcements that, "the subprime crisis is contained". This merely puts off the day of reckoning.

    The real effect of this is the socialization of vast amounts of the US economy. Whodda thunk that Bush and his neocons were bigger socialists than Gus Hall.

    Bush is turning out to be bigger than Hoover, and McCain is his right hand man.

    Don't fall for conventional "wisdom" (idioticy by any other measure), that these bailouts are approved by both sides of the aisle - so therefore they must be good for us. Deregulation, prohibition and all other sorts of evils were also "approved by both sides of the aisle".

  5. National health care has never been about the money. It has always been about the will. At the end of WWII, when its nation was rubbled, billions in debt, the Brits bit the bullet to care for their own through national health care. It was, and consistently is, a very popular decision.

  6. If you loved nationalism, if you loved socialism, if you loved totalitarianism, you'll absolutely be giddy over the right wingnuts latest of five bailouts. The language of the proposal reads, in part:

    "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

  7. I don't read your blog to often other than the comments on abortion in which we disagree. However on this Mortgage bailout we do agree. I've even went back and forth within myself on what should have been done. (After the damage had been done. Hindsite is 20/20 but we do know there were a few sounding the alarm bells a few years ago.) Having said that, I've been thinking, if the government didn't do anything there would have been many saying "why isn't the government doing anything?! So the reaction to the current conditions was a catch 22 of the worst kind.

    As far as placing blame this started in the Clinton era and continued into the Bush era and both parties are equal in blame.

    What is even more frustrating our elected officials (Congress/Senate Republican and Democrat) are literally incompentant! If I see another speech from either party I think I'm going to puke. They should all go! Maybe their pay should be in line with the poverty income level, and require them to buy their own health insurance. Instead the do nothings in Washington have incredible benefits they don't deserve. This isn't a pitch for socialized health care in which I'm totally against.

    Ok I'm done ranting now.

  8. Business runs in cycles: we have periods of expansion and then contraction. While our gov't is so desparately trying to put off the inevitable, a recession is still going to happen. The only thing we don't know is how bad it will be.

    I'd rather we bit the bullet and let it come and the hell with IRS rebate checks that just drove up the national debt.

    If we'd spend the 700 billion on alternative energy research, I'd gladly support it. No, we have to spend money bailing out someone who had no business borrowing money to start with.

    Greed is a terrible thing.

  9. I think and am starting to really hope this toxic mess will bring down the two party system and at least provide us with a third choice or several choices. Both parties are to blame and the sick thing is that someone is going to get rich off of these deals. All of these companies should have strict restrictions on commisions and fees with these bail out percedings. I hope this is the worst and not the tip of the ice berg otherwise start learning chinese or some other foreign language. I am single and have no children to raise but I am really worried about my parents and my other family members with families and friends with families. I am just glad I have managed to save a nice nest egg to protect those I hold dear while this mess gets sorted out. Those who do not learn history are doomed to repeat it. Speculation is speculation on mortgages or in stock like that lead to the great depression.

  10. I have corollary to go along with your plan of putting those in the company to work for the foolishness.

    I think that if the government is forced to buy your worthless company that you ran into the ground to prevent the collapse of the economy, the government should be able to go after your (the employees of the company) assets to recoup its losses. It's legal and they will go after the assets of those who took out loans. The government should be able to go after the assets of employees of the company who gave out the loans. Everyone from the board members on down.

    There needs to be some tangible consequence for those who worked at a company if the government buys it. We've deregulated the economy to a point where this crap could occur. It seems fitting that if we need to be spending "tax payer dollars" that we should be able to go after those who benefited from their previous risk.

    I think this would have two effects. First, board members themselves would be in fear of tanking the company. And second, employees at lower levels would have a vested interest in keeping those above them in check. If you work for a company that is "essential to the economy" you need to assume additional risk.

    A company isn't really just a company if it can tank the economy.

  11. Tony, did you mean to say that the government ought to go after the assets of the principals (i.e., the officers) of the companies who gave out the bad loans? I agree with that.

    But go after the assets of all the employees right down to the tellers? I can't agree with that. I assume that's not what you meant. It would make people afraid to apply for jobs of any kind at any financial institution.

  12. Two emotions dictate every decision we make as individuals and as a nation...Greed and Fear. If you apply that analogy to every recent individual decision you've made, you'll find it is accurate about 95% of the time, and as a nation, nearly 100% of the time.

    As realtors, mortgage brokers, bankers and others pushed Adjustable Rate Mortgages and falsly inflated loan applications over the past decade, greed was the driving factor. Now that the chickens have come home to roost, fear is the driving emotion.

    One thing is for sure, without far-reaching reforms, without the worst offenders being charged and without some economic correction, this problem will not go away, but will get larger. Why? Greed will soon take over again as the cycle continues.

  13. Anon 9:13, I haven't talked to anyone who hasn't agreed that greed was part of the mortgage meltdown. But we should appreciate that in Madison we fortunately have conservative bankers, generally reasonable realtors, and have not really suffered. Maybe values are down 5% or so, but we have not many foreclosures. Two are on the market right now in my price range. One is right across from the elementary school and might be a good Habitat for Humanity project rather than starting from scratch. Established neighborhood with a paved road! jh

  14. jh, you're right, we're somewhat insulated on the real estate side, but not on the 401(k) or IRA side, but since those are very long-term investment tools, they should recover provided they are invested in quality stocks and mutual funds. I am thankful we have conservative bankers and honest realtors, but even in Sioux Falls there are folks like a 21-year old woman who was given an adjustable rate mortgage for a $220,000 home and she makes less than $30,000 a year, now in foreclosure after just one year. There's no way she honestly qualified for that home as a single employed individual, earning less than $30,000 a year.


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