Numerous stories in the press the past two days regarding the government bailout of AIG as well as the various financial sector failures. There were many talking heads and an even greater number of vacuous comments. But one quote stood out among all others. In relation to the AIG bailout, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee said:
Thank God for the Nanny State. Big-daddy government is going to ride in and “unscrew” all the problems arising from our lack of responsibility. This would be the same government, I might add, that bankrupted Social Security with criminal accounting practices, finds 44,000 pages of tax code reasonable, considers limiting their spending to their income irresponsible fiscal management, thinks nothing of paying $600 for toilet seats and bases most of its really, really important personnel decisions – not on talent or ability – but rather a thorough investigation into a person’s opinions on abortion!
Hypocrisy, thy name is government.
Tom Vanderwell says:
Sean,
What are you going to do when we get to Double Jeopardy time? You know, when two banks start failing/merging/getting bailed out a day?
Very well said.
Tom
September 18, 2008 — 10:51 am
Keahi Pelayo says:
I grudgingly accept the recent bail outs as necessary, but I am not encouraging more “nannying”.
Aloha,
Keahi
September 18, 2008 — 11:11 am
chris e says:
We are in the wrong business.
Who’s is going to bail any of us out?
Answer:No one
Why: small potatoes.LOL
Over the years I observed that banks and the Wall Street are not really helping the real estate market,rather they are helping themselves at the expense of the market.
I think until some REAL legislation applies to those institutions,the idea of Land contracts,AITDs ,(does any one remember those?) and owner financing are looking more and more appealing
September 18, 2008 — 12:26 pm
Missy Caulk says:
One step backwards for Capitalism one step forward for Socialism. It is a sad time for our country. When people start talking Universal Health Care of any of these programs, I ask them how long has it been since you have been the post office or the Secretary of State.
Great post Sean.
September 18, 2008 — 12:32 pm
Sean Purcell says:
Tom,
Are you sneaking into my computer at night? Very prescient comment. There is actually a part 3 to this little Jeopardy theme and it comes out tomorrow. We seem to be on the same wavelength (it will make more sense tomorrow).
September 18, 2008 — 12:54 pm
Sean Purcell says:
Keahi,
I know what you mean. I am not in favor of government intervention at all, yet I see what is happening and wonder, if I were in charge, would I actually let it all fail.
September 18, 2008 — 12:56 pm
Sean Purcell says:
chris e,
You touch on an idea that is making more and more sense to me: the key to survival these days is to quickly become “too big to fail.” The little guys are not even seen, the pretty big guys are being allowed to fail… I think B of A is on to something. We’ll call it the AIG Strategy.
September 18, 2008 — 12:59 pm
Sean Purcell says:
Missy,
Two more great examples of the hypocrisy. Any I agree with your assesment: one step back for capitalism + one step forward for socialism is a two step loss.
September 18, 2008 — 1:03 pm
Chris the Implementer says:
Wow, I am glad I am not the only one that finds the statements of Barney Frank as laughable. Sure, market factors have some wild swings at times, but guvmint and regulation is rarely… if ever the answer. Free markets have an uncanny ability to heal themselves and to learn from mistakes…
… i just hope we learn from ours when we expect govt to step in and mend all that ails us!
God Help us!
Chris the implementer
September 18, 2008 — 2:31 pm
MG - Arizona Housing Bubble says:
Agreed Chris.
From what I’ve read, the truth is that in many cases where people are eager to blame capitalism or the “free market”, those systems are not actually free at all.
I imagine it’s like me chaining my dog to a pole in the middle of the yard and putting her on a 5 foot leash.
Then I complain that I give her “free” use of the entire backyard and she only uses that one part of it!
These sort of systems and agreements with “private” entities is like the dad who will always put money in his daughter’s bank account when she’s off at college.
There’s no incentive for responsibility or for her to avoid failure because she makes a call to dad and money is in there the next day.
Sometimes the ones that stay furthest away from the edge of the cliff, are the ones that have been allowed to look over it to begin with.
September 18, 2008 — 4:05 pm
Chris the Implementer says:
Wow, I love that last statement. I think it sums up the whole thing so well,
“Sometimes the ones that stay the furthest from the edge of the cliff, are the ones that have been allowed to look over it to begin with.”
My analogy is a little more juvenile.
“When you are playing a racing game on xBox and have the ability to hit reset, you will take risks that you never would if you were driving a real car.”
The lesson in either case is when you have the ability to fail, the play the game a bit safer.
Chris the implementer
September 18, 2008 — 5:21 pm
Tom Vanderwell says:
Sean,
You’re right. We’re on the same wavelength.
I’m looking forward to Double Jeopardy….
I’m thinking I’ll take Political Doubletalk for $1200
Or Moral Hazard for $1600?
Cliff jumping for $1000?
Financial Meltdown for $2000?
I’m sure that what you’ve got cooking is better than any of that!
Tom
September 18, 2008 — 5:39 pm
Benjamin Dona says:
Can anyone say RTC?
They (Bernanke and Paulson) are actually having a closed door meeting with members of Congress to discus just such an option as I write this post.
It’s absolutely unbelievable!
September 18, 2008 — 5:41 pm
Thomas Hall says:
While Barney’s comments are laughable, what isn’t is the fact that we as tax payers are now footing the bill.
September 18, 2008 — 8:45 pm
Clarendon condos -- Jaybird says:
I must say the bullshI** credit rating systems and corruption in the markets makes me angry. I also hate that the gov is making it happen by affirming to Wall Street there will be no serious consequences if they can’t manage themselves. Free markets don’t work/police themselves with gov bailouts so it’s the worst of both worlds with no hardline financial accountability such as being wiped out off the face of the earth. It’s messed up and sickening! I speak out of NOT being erudite on the complex issues involved and I know it. However I do have a great “smell test” I use when showing property to my clients and this bailout does not pass the smell test.
September 19, 2008 — 5:34 am
Michael Cook says:
Believe me, no one here wanted to see the consequences of no intervention here. If the government had literally done nothing, it would have been much worse than the great depression. The job losses would have been staggering and there would have been economic choas on a global scale.
I am ok with blaming regulators, rating agencies and the companies, but the government had no choice. This is a win for “reason” not for socialism. There will be more regulation and this problem will not occur again for at least 20+ years, but people will think of new ways to win at the future cost of others.
September 19, 2008 — 7:55 am
Sean Purcell says:
Michael,
I wish I could see this as clearly as you do. I understand the “no choice” opinion here and I can not imagine the carnage of allowing the markets to take the beating they have earned… but at the same time I can not help but feel that each time the government has no choice but to intervene we are set up for an even greater fiasco just around the bend. Where does it end?
September 19, 2008 — 9:27 am
Tom Vanderwell says:
I was just talking with one of our portfolio managers (not mine, mine is too small – the bank’s people) and the term, “Unintendend consequences” came up.
There will, I’m convinced, be a lot of unintended consequences that we don’t really want. That’s going to be interesting to see…. (and I don’t believe they will be pretty).
Tom
September 19, 2008 — 9:31 am
Sean Purcell says:
Tom,
Funny you should say that. I refer to the idea a little more forcefully as The Law of Unintended Consequences. The government (and pro-regulation cheerleaders) never seems to grasp this law… but we all certainly pay the price for it.
September 19, 2008 — 9:40 am
Michael Cook says:
Sean,
I do not believe it will ever end. It contributes to economic cycles. When the cops get too far behind the bad guys, everything blows up and the race starts anew. No one knows whats going to come out of the new regulations, but you can bet as soon as they come out, every investment banking think tank will be working their magic to figure out how they can make more money.
I just hope I can figure out how to buy a whole lot of cheap properties from this new government agency. They will be understaffed and overworked as defaults begin to soar, so there will be fortunes made after this crisis.
September 19, 2008 — 10:05 am
chris e says:
Clarendon condos — Jaybird September 19th, 2008 5:34 am
I must say the bullshI** credit rating systems and corruption in the markets.
AMEN ALLELUIA
The CORRECT/EXACT word in the English language describing what the financial institutions and Wall street have done, to have us believe that they are engaging is serious business.Most people have bought in to that crap and worry about their credit rating and financial statements as the bosses (the institutions )want them to feel. I’m having SO much fun doing short sales and making offers on reposed properties and TOTALLY ignoring the banks instructions about the paper work.
I have literally used the words “this offer is written on a real estate form (not the banks form)has an expiration day and is take it or live it”
I have not to see one refusal yet.My clients are of the same mind.
September 19, 2008 — 3:25 pm
chris e says:
To Sean.Yup
September 19, 2008 — 3:27 pm