Bailing out Fannie Mae and Freddie Mac just encourages more of the kind of bad behavior that got them in trouble. They should be alowed to fail if that is what the market dictates.
Please forgive me not being an economist, nor having occupied myself very largely with such topics.
But is a free market really a free market if the federal bank has to intervene and put out enormous warranties to help failing banks survive? Isn’t it a given that a really free market has the duty to regulate itself?
State intervention was the order of the day in the old Sovjet Union, or Poland, or Czechoslovakia, etc. etc. That’s why these countries failed so miserably in the end.
Now, don’t get me wrong. Everyone hit by the current recession has my deep commiserations. It all seems to be a ‘rock and a hard place’, or ‘Scylla and Charybdis’, or ‘Catch-22’ situation...
From my Dutch point of view, I can only say that, as far as I know, the state didn’t have to intervene in the past three decades (when I followed politics with interest). The market regulated itself excellently; mainly because prudence was (is?) a virtue here. You won’t ever get a subprime mortgage loan; and apart from the three ‘big banks’, and half a dozen or so ‘small banks’ (all tried and trusted for ages), the few loan shark companies with lots of small print are known everywhere and their name is not good, how much they advertise. And that is exactly why they don’t get any bigger over time; they only answer to the needs of the few who, out of shortsightedness or stupidity, are in need of a sudden cash flow.
It is highly ironic that the current problems of Belgian bank Fortis are due to their buying the major part of Dutch bank ABN/AMRO - the Belgian CEO Votron ‘guaranteed’ for a good year that everything was A-OK, until reality seeped through in the last few weeks. He had lied, and market rules have dictated that he’ll step down in a week. Fortis as well as ABN will continue to survive, no doubt. And the state did not have to intervene.
How do conservative Americans look upon the current helpings by the Fed Bank pertaining to (if I am right) three major mortgage loan companies in a relatively short time? Though Holland is more ‘liberal’ in your sense of the term (or ‘socialist’ if you will), it did not happen over here. Please, please, mind: I don’t want to sound vain or victorious or arrogant; but I am highly curious, that is all.
Respectfully submitted, A13.
Democrats should have just raised their taxes, solves everything else.
so now I am worried..I do have a lot of my 401K money in a cash reserve account at Fidelity...what should I do...anybody?