Just one day after I write a post complaining about the inaction of congress, they take action! Last night, select leaders of congress met with the Treasury secretary and Fed chairman to be briefed on the economic decline. For once I actually agree with Bush. We need to invest "tax-payer" money to get the economy back on track. Of course, on the ride to work and on the ride home, I kept hearing soundbytes of "real tax-payers" on radio call in shows decrying the use of federal funds for this. But then, when you tell them that their money market might be in danger, or that their 401k is plummeting, they don't know what to think. After the news broke that Putnam is closing a money market fund, the callers were simultaneously outraged about the federal government giving out "bailouts" and fearful of what might happen if they didn't. I think most people can agree that the worst thing for our economy would be for it to stop growing. Then we'll really be in trouble. We already have so much debt from tax cuts and wars, that if our economy doesn't keep growing, we'll have no way to recover. Additionally, China, India, and other countries will step up to take our place in the global economy. Also, I'm tired of people referring to buying the AIG debt as a "bailout". The fed OWNS AIG now. It's not like they just gave them sacks of money for their troubles. The federal reserve owns 80% of the company. And if they can stabilize the economy, that might actually be profitable later.

So, being an Obama supporter, I was quick to point out to a lot of people that McCain's support of deregulation for investment banks wasn't helping this big mess we were in. And it's not that I'm relenting on McCain, I still think he has no idea what's going on, except he knows that Wall Streeters are "Greedy and need to be punished". Whatever, fine. You go to Abu Ghraib with them and we'll stay here and figure this whole thing out. But upon further research, it seems that we've tried two major banking infrastructures and both eventually failed. Before the depression, most banks were big conglomerate banks that were a combination of consumer facing banks and investment banks. So when consumer funds were put into risky stocks and the investment banks lost their shirts, so did their consumers. Thus, everyone was poor and starving. So then came the Glass-Steagall act, making it illegal to have both types of banks rolled into one. This was repealed in 1999 under Clinton. However, the investment banks were making so much money being able to take on high risk investments with huge payoffs while not operating under the regulations that govern the consumer banks that they didn't change back to the old model. And somehow that failed too. The few that did switch back have been relatively immune to the current crisis (Bank of America and J.P. Morgan). So was it really deregulation that caused this? I have to wonder. Is it that bad to have mortgage backed securities? They still seem like a good idea in theory, but maybe the risk was just never assessed accurately. It's the people on Main st. who gave these loans to people who couldn't afford them and then sold those loans to the people on Wall st. It's easy to sit in a tower and blame Wall St. for everything but the truth is we would never have experienced the growth and prosperity that we have if it wasn't for them. Can we just admit that we are a nation who is totally unskilled when it comes to managing our personal finances and that's why we live off of loans, credit cards and mortgages like they're income? Instead of teaching home ec in high school, why not have a household finances class, where they teach you that when you get a 30 year mortgage, you pay for your home twice over at least? Anyway, for anyone who thought my last post was all doom and gloom and that the economy isn't really that bad, it most definitely IS. This week alone, saw the collapse of 3 of the 5 biggest banks on Wall St. and the collapse of the largest insurance company in the country. If you think that a "once in a century financial event" (-Alan Greenspan) like this can happen and the economy is still ok, then ... well I'll just say you're wrong. That's why we need to suck it up, and go through with buying up the bad debt because otherwise it really might turn into a depression.