Leah, I love how involved you are! However, I am not exactly sure that it would be better for the US People if the bailout fails. I decided to ask an old friend his thoughts because he has a degree in Economics from Purdue University. What he said makes me believe that the bailout needs to happen:
"One thing to remember when looking at the situation is that all banks, brokerages, etc are all intricately woven together. They are different companies but they are all playing a balancing game with each other all the time with cash and risk (through various contracts and agreements). This entire system is typically intended to help allocate cash to businesses and individuals who need it.
Recently all of these financial institutions are reluctant to do business with each other because they fear that any deal they strike will go bad resulting in a loss. So the end result is that it is harder for businesses to get cash they need to stay in business and it's harder for individuals to finance larger purchases.
The cause is probably a combination of lax mortgage lending standards (people borrowing that should not be), credit ratings that are not conservative enough (a previous understatement of risk), and in general too many people and business that borrow too much and cannot handle being in a cash poor environment.
The ideal plan might be to not bail people out in the true way of capitalism. This plan would be really, really, really painful for just about everyone. The less painful alternative is for the government to lend to these financial institutions. This will smooth the bump out, but at the cost of bad inflation, a falling dollar (and consequently an increase in the cost of the commodities that our economy imports), and some people not learning their lesson.
It really is a crisis, but how badly it hurts depends on your exposure to the problems."
I know how strongly you feel, but I can't ask for it to fail because I think it will help smooth things out for now and help people to keep putting money back in the economy.
Well, the bill was passed by the House this morning.
It is true that something had to be done, however this bill is extremely flawed.
I'm especially sick over Section 305 which states, "manufacturers of energy-efficient appliances will qualify for up to $250 in federal tax credits for each machine they produce over the next three years." This single section is estimated to cost taxpayers $322 million over the next ten years.
What do appliances have to do with our current financial crisis? Nothing. Section 305 is just another earmark to get the House to vote the bill in.
The government is putting taxpayers through the ringer and hanging us out to dry.
Yes, there's a lot of irrelevant stuff in the bill, but it's only because the emergency bill didn't have time to go through the full process of creating a bill. It was really cool to research this stuff!
Here's what I learned, for those who don't know how it works: It had to be attached to other bills that were already on the voting agenda so that it could get to the floor of congress quickly. The most logical one to stick it to this time was HR 1424 - an energy bill that was ready for voting. The previous version of the emergency bill, the one that didn't pass the House, was attached to HR 3997, which was a bill to provide better financial benefits for veterans. Thank goodness Congress can amend or change a bill even in the moments before it's voted on!
I consider the rest of the bill to be good news - It's Congress taking action to encourage energy independence and alternative fuel sources. Even $322 million divided by 140 Million taxpayers divided by ten years only comes out to about 23 cents per taxpayer per year.
I'm ok with paying an extra quarter every year to promote energy efficiency, especially if it means things get done quickly.
I love the fact that we can all have these discussions. So many people read your blog - You're doing a great thing!
4 comments:
What a load of tripe! (Congress, not you, Leah.:) ) They're full of it!
Leah, I love how involved you are! However, I am not exactly sure that it would be better for the US People if the bailout fails. I decided to ask an old friend his thoughts because he has a degree in Economics from Purdue University. What he said makes me believe that the bailout needs to happen:
"One thing to remember when looking at the situation is that all banks, brokerages, etc are all intricately woven together. They are different companies but they are all playing a balancing game with each other all the time with cash and risk (through various contracts and agreements). This entire system is typically intended to help allocate cash to businesses and individuals who need it.
Recently all of these financial institutions are reluctant to do business with each other because they fear that any deal they strike will go bad resulting in a loss. So the end result is that it is harder for businesses to get cash they need to stay in business and it's harder for individuals to finance larger purchases.
The cause is probably a combination of lax mortgage lending standards (people borrowing that should not be), credit ratings that are not conservative enough (a previous understatement of risk), and in general too many people and business that borrow too much and cannot handle being in a cash poor environment.
The ideal plan might be to not bail people out in the true way of capitalism. This plan would be really, really, really painful for just about everyone. The less painful alternative is for the government to lend to these financial institutions. This will smooth the bump out, but at the cost of bad inflation, a falling dollar (and consequently an increase in the cost of the commodities that our economy imports), and some people not learning their lesson.
It really is a crisis, but how badly it hurts depends on your exposure to the problems."
I know how strongly you feel, but I can't ask for it to fail because I think it will help smooth things out for now and help people to keep putting money back in the economy.
Well, the bill was passed by the House this morning.
It is true that something had to be done, however this bill is extremely flawed.
I'm especially sick over Section 305 which states, "manufacturers of energy-efficient appliances will qualify for up to $250 in federal tax credits for each machine they produce over the next three years." This single section is estimated to cost taxpayers $322 million over the next ten years.
What do appliances have to do with our current financial crisis? Nothing. Section 305 is just another earmark to get the House to vote the bill in.
The government is putting taxpayers through the ringer and hanging us out to dry.
Yes, there's a lot of irrelevant stuff in the bill, but it's only because the emergency bill didn't have time to go through the full process of creating a bill. It was really cool to research this stuff!
Here's what I learned, for those who don't know how it works: It had to be attached to other bills that were already on the voting agenda so that it could get to the floor of congress quickly. The most logical one to stick it to this time was HR 1424 - an energy bill that was ready for voting. The previous version of the emergency bill, the one that didn't pass the House, was attached to HR 3997, which was a bill to provide better financial benefits for veterans. Thank goodness Congress can amend or change a bill even in the moments before it's voted on!
I consider the rest of the bill to be good news - It's Congress taking action to encourage energy independence and alternative fuel sources. Even $322 million divided by 140 Million taxpayers divided by ten years only comes out to about 23 cents per taxpayer per year.
I'm ok with paying an extra quarter every year to promote energy efficiency, especially if it means things get done quickly.
I love the fact that we can all have these discussions. So many people read your blog - You're doing a great thing!
Love ya
-Ben
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