Good Reading on the Finance Meltdown

I need a lot of help understanding economics. Still not sure exactly what Wall Street is. (Hopefully I’ll never run for president, because that will come back to haunt me.) So, for others in the same boat, here are some links to articles I’ve stumbled across (most through JT at Between Two Worlds) that explain what’s going on and how we got here.

My initial gut reaction was to oppose the bailout. Then I suspended judgment for a couple of days on the basis of realizing that I really don’t know what I’m talking about. Now after doing some reading, I’m back where I started, for a few reasons.

  • It seems to me that the bailout is a massive step toward a government-run economy, which we’re already skewed toward anyway. As a free-market, less-government-is-almost-always-better guy, I don’t like that.
  • From what I understand, the fallout from allowing more institutions to fail would be significant, but nowhere near the complete economic collapse of, say, the Great Depression. There would have to be some serious changes in how financial firms do things, and if you’re retiring in 5 years there could be trouble. But by and large, it would be companies that contributed to the credit bubble that would suffer the effects of the burst.
  • Related to #2, the precedent a bailout sets is very bad. It says to investors: Go ahead, take crazy steps to try and make wild amounts of money, and get so big that you can make the case that the economy will suffer if you go down. Then the government will have to bail you out if you get in trouble. On the other hand, if some of these guys do crash and burn and the government lets it happen, it sends the message that you’re responsible for the consequences of whatever investing you do.

So that’s where I am. And it’s worth about what you paid for it (except for the good articles above).


5 thoughts on “Good Reading on the Finance Meltdown

  1. I’m generally in agreement with you on your post-reading concerns about this bailout. I don’t want the gov’t swooping in to ‘rescue’ companies and individuals who got us in this mess to begin with (whether via greed or abuse of the system or staggering incompetence, or some combo thereof). This smacks of ‘government as savior’ policy which I, putting it mildly, oppose.

    One provision I want to see in this bailout bill if it comes is a clear declaration of where the eventual profit the government makes off the buying up of mortgages goes. They’re going to be buying mortgages more or less at the lowest conceivable price, and then hold them until the markets (housing, etc.) recover. Given it almost certainly will, they’ll be looking at a huge profit when they sell them off. I want that profit earmarked for something proper. My thoughts right now are: pay down the deficit. One WSJ optimist estimated 2 trillion. Even if he’s wildly optimistic by half, that’s a sizable sum. And given my confidence in the federal gov’t to do the right thing on their own, I want it specifically stated where that money goes.

  2. now that i am back from the land of milk and honey (austin), i need to sit down with the hunts to discuss this shenanigans. i had plenty of time outside the mayhem of charlotte to sift through it all and think i’ve nailed down a good theory for wachovia’s demise. i used to audit the MBS groups when they were making money hand over fist and would laugh (literally) at our questions about credit and market risk- the very prediction of the scenario that is playing out today. that’s one component. the other was the fact wachovia cashed in it’s disciplined, conservative M&A (merger & acquisition) strategy because of pressure from wall street, greed, and a few bad eggs that came from a consulting company and slowly ran off all the good, disciplined men of character. i could name names, but i won’t. even though i want to. these guys made deals on the golf course and over steak dinners rather than looking at the numbers. the “problem” is, their predecessors made so many good decisions (southtrust, prudential), the board let the junk slide through- not taking into consideration the leadership of the group making those decisions had completely changed.

    now, it’s not soley greedy bankers at fault. also to blame are: greedy politicians, homebuilders, construction lenders, mortgage underwriters and american citizens – irresponsible americans who live outside their means (on credit) and think they’re entitled to 2 cars, a big house and a flat screen tv even if they can’t actually pay for it.

    my tip: read the editorial page of the wall st. journal. overwhelmingly, the write-ins are smart, fiscally conservative businessmen (from USA and abroad) who offer great insight (and ideas) to this whole thing.

    bush shoud be tarred and feathered for his role in all of this last week. bush’s speech was an all time low. he incited fear into the american public and exibited poor, poor leadership.

    also see this:

    whew. done for now.

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