March March is over. Thats good I guess, since its like my 10th favorite month. Only thing good about March is that McDonalds has shamrock shakes. I had a big one this year but even though it was excellent it just didn't carry the same splendor it had in the past. Oh well. We are about 5-6 weeks out from becoming a family of three. We are pretty excited and finished our birthing classes last week. Our showers are over and we have a lot of thankyous to write. On that note lets get to some politics. I remember when Obama won the election he gave a speech that made me feel like maybe he would do a good job as president. Now that he's been in office for a while I am becoming more and more certain that he has no clue what he is doing. Obama fans tell me that whatever he does, he will be better than Bush. If there is one thing I have learned in life, its that things can always get worse. I remind them that Coolidge was a bad president, but no one remembers him because of how bad Hoover was. Maybe Obama is Bush's Hoover...? To which the Obama fans generally have no response becuase their knowledge of our nation starts with the austin powers and forrest gump versions of the 60's and ends with Carson Daly. Regardless, Obama and Geitner seem convinced in running a social experiment in America, and we have 3.5 more years to endure. I saw a clever article this morning that sums up how government bailouts don't help anyone. Everytime you hear anyone say "too big to fail" they are really just saying "I think short term and want to pass my problems to the next guy". How do you think companies get too big to fail? They get too big, fail, and then we prop them up so they can get even bigger, in perpetuity. I think to myself what a shame that no one can drive a car anymore since Studebaker went out of business, or how there aren't any airlines since Pan-Am went out of business. Obama has never actually done anything, and without failure it is hard to develop much character, or an understanding of what it means to remove the risk of failure from a capitalistic society. Why does his team think that the best thing to do for a country with debt problems is to borrow your way out of it?
Kevin says: I think what they meant by "too big to fail" was that the banks held too many savings deposits to be allowed to fail. The FDIC fund simply doesn't contain enough money to insure all of the deposits of citizens who have their money at Citibank, Bank of America, and all of the others that were on the brink of collapse. If there were a run on Citibank or Bank of America, people would lose money - the FDIC just couldn't shore up the accounts for every customer. Result: The general public would take that to mean that savings accounts everywhere are in jeopardy and withdraw their money from their smaller, regional banks, causing a run on those banks. You'd see things topple like a house of cards. By shoring up the banks for the time-being, they're able to give the appearance of having all of the money that you deposited - which in fact, they don't. They're only required to keep about 15-25% (don't know the exact rate) of savings actually in the vault, the rest they can use to make loans and mortgages. So by giving the appearance that banks can still fulfill all of their obligations, people are in no hurry to run out to the bank and pull out their money. Eventually, the banks will make the money back (we all hope).
If they hadn't shored up the big banks and AIG (which provided the investment insurance for banks and in a round-about manner is making payments on bad mortgages and investments - giving the banks the money they need in order to fulfill their depository obligations, just as if consumers were still paying their mortgages) we would have seen a total collapse of the financial system and a return to hoarding money in lockboxes buried in basements and envelopes of cash stuffed under mattresses.
Leave a comment (1)
Go back to archives
Go back to main page