Monday, September 14, 2009

I'm Sitting in the Dark with no Water Waiting for my Disability Check

So I've been hearing a lot in the past week about pro-free market capitalists rising up against so-called government control. Now why don't we take a look at what exactly they want the Obama administration to "take its hands off."
First, they want less control of the free market. Fewer regulations, they call for. They want to be free to do what they want; free to have their banks collapse and businesses fail. I think that deregulation is a great idea - if you want more failures such as the Lehman Brothers' last year.
For example, one way that the government controls the market is through the Federal Deposit Insurance Commission (FDIC); which guarantees people's life savings accounts. I'm very much a fan of looking carefully at the consequences of things you support. These people don't seem to remember that the freedom they so strongly call for leaves greedy bankers free to lose the life savings of their investors.
Second, they want the government's hands off their money: for instance, "hands off my Medicare and disability insurance!" No matter that the money they want the government to stop controlling is in fact coming directly from the government.
Last, income taxes! We can't stand to pay income taxes. The government is already taking too much of our money; they don't need more of our hard earned dollars. But really, they ought to get to work on fixing up those roads, and they better not stop giving me water and electricity, and by gods they should really make the postal service better... Oh wait.

-Ilan Seid-Green

30 comments:

Anonymous said...

A few comments:

1.) If you give failing businesses money when they're failing, as in not profitable, what is the point of propping them up at all? An influx of capital will not make them suddenly more innovative, nor suddenly competitive. They will fail eventually. So why give them tax payer money so that they can drag out their deaths longer?

2.) I can assure you that not one person wants to dissolve the FDIC. In fact, under the Bush administration, the account limit went up to 250k from 100. NO one wants that to go away.

3.) for Medicare, where do you think the money comes from? The treasury, that's where. And it's funded by the taxpayers. Why should I, a tax paying American, have to pay for someone else to get medical insurance?

"Leave it to James A. Lebenthal, of the Wall Street bond firm Lebenthal & Company, to reveal the harsh financial truths: “The money comes from the public. Not today’s public, but the public you have just sired and that’s lying in your bassinet,” he told The Times." (The Heritage Foundation)

Medicare, Medicaid, and Social Security, according to all but the most optimistic of forecasts, will become bankrupt within the next thirty to fifty years. When they do, you will have many, many more people of retirement age or older than people working, and they will all expect some form of entitlement from the government. Good luck trying to pay all of that with the money in their respective trusts.

4.) Income tax. While you are right that most of us (Libertarians) think that the government is too huge, and that the tax rate is much too high, there is a point. Why does the government need money? aside from providing police, fire departments, and an armed forces, they don't. Senators and Congressmen don't need to make a salary whilst in office; there doesn't need to be New Deal entitlements; we don't need government built roads. In fact, I believe that taxes should be voluntary, much like a public radio station. Even in only half of the country donated, it would be able to pay for the post, enforcement agencies, and army. Sure, we wouldn't have the latest and greatest weapons, but neither would we be throwing money at defense contractors and private security firms. It would arguably yield a better army. Oh, and PG&E would take offense to you saying that they are run by the government, they're publicity traded..

All I am trying to say is, good first post. Keep 'em coming.

-Max

The new Kevin (a.k.a Kevin Kwan) said...

Max,...

1. Ilan never said he supported a bailout. He merely said that it was the lack of regulation that caused the bank to fail in the first place.

2. No disagreements there.

3. Because other people don't have healthcare. Of course, there is the unresolved issue of how to pay for it. And no one wants to talk about cost controls either.

You are definately right about the rising costs of healthcare. It's not just more baby boomers retiring; it's also new medical technology and drugs. The development of newer medicine will no doubt pass down the costs to patients in the form of expensive drug costs.

4. Sounds like you would be happier under the Articles of Confederation. It's ironic that many of the libertarians claim they are constitutional fundamentalists when their beliefs are more in line with the Articles of Confederation.

LahaRulle said...

1. Kevin Kwan is exactly correct.

2. The FDIC was simply an example of how the government plays an important role in our lives, and needs money to do so.

3. First, Kevin Kwan is right on again: because other people don't have it. Plenty of people work hard all their lives and are still unable to afford healthcare.
Second, who do you think paid for research for drugs such as penicillin? The government paid for a large amount of drug research and development, paid for with, guess what, tax dollars.

4. Again Kevin Kwan is right in line with what I would have said. You definitely sound like you think the Articles of Confederation are the way to go; remember how well that worked last time?

-Ilan Seid-Green

Anonymous said...

1.) "free to have their banks collapse and businesses fail." I think was the quote. They would fail anyway. That's the only point I was trying to make: that propping up failed companies only serves to suck money.

And I do agree, derivatives trading is very, very dumb, but it made a lot of people very rich. The ends do not, in any case, justify the means, but I'm sure that even if that market was regulated in any efficacious way, the problem would not have been any less pronounced. This crisis was caused, at least initially, by people who probably shouldn't have bought a homes in the first place, it just so happened that there were enough venture capitalists who wanted to bundle mortgages together and sell them that it became profitable for lenders to give away huge gobs of money to people with little to no income nor credit and expect them to pay. If they didn't, they thought, then the few that defaulted would be drowned out by the other then thousand or so bundled loans in each package. Oh how wrong they were. See, it was people, not greedy investor, not evil capitalists, that caused that, regulation would not have evaded the problem.

2.) I don't think that there have been many runs on banks, none in fact. So at the moment, and for the foreseeable future, the FDIC doesn't need any money. at all.

3.) sure, other people don't have health care, but tell me why should I care? It's not my fault if they get sick and they didn't get coverage earlier in life, so why should I help to foot the bill for medicare? It is a really, really dumb system that was only sustainable when there were more people working than retired, it should have been phased out in the seventies.

Why would I be happier under the articles? Does it say in the constitution that the government needs to keep up the country's infrastructure? no. Does it say the government needs to give out free money to people without jobs? to give health care to the poor? to pay for people to not work? not in the constitution that I read. The government's job is to protect it's citizens from external attack and internal strife to provide a crucible for a pure free market economy. And I really don't support the articles, I think that state governments are useless.

The new Kevin (a.k.a Kevin Kwan) said...

1. "This crisis was caused, at least initially, by people who probably shouldn't have bought a homes in the first place, it just so happened that there were enough venture capitalists who wanted to bundle mortgages together and sell them that it became profitable for lenders to give away huge gobs of money to people with little to no income nor credit and expect them to pay."

Sure let's go put the blame on the customer.

I don't think "it just so happened that there were enough venture capitalists...". This kind of trading stemmed from greed.

Businesses are to blame for not using obvious judgement before lending money. The customers were only able to purchase their houses because they got loans from the banks; it's hard to blame people for trying to buy a house when they acquired the money (in the form of a loan) to do so. Banks and those investment firms are the victims of their greed.

Regulations on who gets loans and who doesn't is just to prevent the banks' greed from overtaking their common sense.

A perfect analogy would be who is to blame for a child being fat, the kid who purchases candy and soda or the parent who gives the money to the kid?

2. It's a safeguard for when banks do get a run for their money. Think of it as a savings account for a savings account.

And besides, people (including I) feel more comfortable knowing that my money in the bank is insured. This encourages us to make deposits at the bank. I don't want to worry about my money vanishing the day after I deposited them.

3. "It's not my fault if they get sick and they didn't get coverage earlier in life..."

Many people are too poor to afford it. You are right; it is not your fault, but a little kindness goes a long way in improving this country's image.

For starters, Canada and the entire EU have lower infant mortality rates than the US.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html

From greatest infant mortality rate to the lowest.

#180 - US

#182 - EU

#189 - Canada


4.

"In fact, I believe that taxes should be voluntary, much like a public radio station."

In practical terms, federal taxes were voluntary under the Articles. Congress could levy them, but only the states could decide whether or not to pay them.

"Why does the government need money? aside from providing police, fire departments, and an armed forces, they don't."

That's pretty much the primary function of the federal government(especially the last one)under the Articles - the purposes of defense.

"Senators and Congressmen don't need to make a salary whilst in office; there doesn't need to be New Deal entitlements; we don't need government built roads."

I don't know about the first part, but being a senator or congressman is a full time job.

By government, I'm assuming you're saying that the federal government don't need to build roads. So, there are only two options then: through state funding or private funding. Either way, both of them would fit snugly within the provision of the Articles.

Andrew said...

There isn't much to argue with simply because many of Ilan's points are based off of basic philosophical principles. I know the conservatives want, as Ilan mentions earlier, limited government regulation or presence. There may be a time when the federal government has abused the inferior governments or its people and there must be certain repercussions in response to that, no question. However, when the economy is crumbling, severely, and businesses are unable to preserve their interests, I don't see how government intervention can be ignored let alone fought with. This isn't a government takeover, it's a business/corporate loss. I don't think I'm going on a limb here, so what other plan do the conservatives propose as an alternative solution to this economic crisis? I am also unable to comprehend how letting the banks and other such corporations fail, is somewhat remotely an intelligent option, seeing historically in the New Deal, that if the government-run programs hadn't taken the initiative, would we have the opportunity of debating as of now? The only characteristic I recognize from partisan conservatives such as Sean Hannity, Rush Limbaugh, Mark Levine, and others is pride with regards to Obama's health care reform and stimulus package. Is there a sense of selfishness and ignorance as well? Let's allow the economy to shatter while we keep our sense of dignity. Now it may seem, I'm completely bashing the Republicans here, but I am nowhere near a liberal, however, given the certain circumstances, I do believe that the direction Obama is trying to steer toward is the right one, and let's not forget, he is trying to do something, at least. Max, I do not want any abusive, power struggling, oppressive government than you do, but it's highly unlikely, that Obama is going to filter ALL of his "socialist/fascist" policies through Congress with ease. Moderate government-regulation is essential to success. Tyranny, authoritarianism, fascism, and socialism is not. Hopefully you understand what I'm trying to convey here. When I read this, I was having a hard time making sense of it, "In fact, I believe that taxes should be voluntary, much like a public radio station. Even in only half of the country donated, it would be able to pay for the post, enforcement agencies, and army. Sure, we wouldn't have the latest and greatest weapons, but neither would we be throwing money at defense contractors and private security firms. It would arguably yield a better army." What's the point of having the strongest military in the world if the latest and greatest weapons, defense contractors, and PRIVATE security firms (why are you attacking PMCs?) are left without funding? I am enjoying the debate :)

Anders said...

"Sure let's go put the blame on the customer.

I don't think "it just so happened that there were enough venture capitalists...". This kind of trading stemmed from greed.

Businesses are to blame for not using obvious judgement before lending money. The customers were only able to purchase their houses because they got loans from the banks; it's hard to blame people for trying to buy a house when they acquired the money (in the form of a loan) to do so. Banks and those investment firms are the victims of their greed.

Regulations on who gets loans and who doesn't is just to prevent the banks' greed from overtaking their common sense.

A perfect analogy would be who is to blame for a child being fat, the kid who purchases candy and soda or the parent who gives the money to the kid?"

Uhhhh yeah actually let's blame the customers considering they took out the loan they knew they wouldn't be able to pay off. Your analogy about the kid is not only wrong its also insulting as you are suggesting these people are so idealistic and uneducated they have no idea that candy can make you fat...(or loans need to be repaid)
This trading stems from greed? You don't seem to understand how corporations work. Corporations aren't out to dominate the world and steal your puppies, they are trying to make money and present a product in order to make said money. It goes right along with the idea of suing a fast food company for you becoming fat, fast food companies don't walk up to you and shove food down your throat, rather you go to their establishment and partake in their product. This lack of accountability among consumers is a terrifying trend.

You talk about acquiring money in the form of a loan, yet a loan by definition is simply borrowing, these people didn't earn this money, they wanted these companies products and they borrowed money in order to get it. If I borrow a thousand dollars from the bank to buy a guitar and this guitar doesn't work as advertised who is accountable? If it's the guitar makers fault he is responsible, if it's my fault for not doing my research I'm accountable. Nowhere along the line is the bank/corporation responsible.

I will naturally be disagreed with by pretty much everyone but the fact still stands, real estate companies did not force these people to buy homes, these people bought them willingly. While they may not be fat kids at the ice cream store they certainly had their moment of delusion when they BOUGHT A HOUSE, not exactly an easy decision, without checking basic facts. The important distinction is that these people are not sheeple, they have minds of their own, but they made a bad decision, bought a house they couldn't afford, and at the end of they day it IS their fault. If I see a free Xbox banner on the side of my computer and I click on and get a virus I can cry and complain I didn't know what would happen and feign ignorance I'm still the one responsible for clicking. That example can't hold water to buying a house but its relatable.

Bring on the corporate conspiracy theories about all CEO's being Nazis and how everyone who bought a home in the last 5 years and defaulted was somehow tricked.

Anders F-R

The new Kevin (a.k.a Kevin Kwan) said...

Andrew, conservatives think that the economy would heal itself over time without the government. They say that tax cuts to businesses would allow them to create more business investments which would expand career opportunities. Of course, this strategy creates it own set of problems.

how letting the banks and other such corporations fail, is somewhat remotely an intelligent option, seeing historically in the New Deal, that if the government-run programs hadn't taken the initiative, would we have the opportunity of debating as of now?"

A question like this is way too open-ended. Our economy would probably be totally different if the New Deal had not taken place; I think that no one doubts that the Great Depression had long term changes in our economy or at least in the way we view it. We would still be debating over the economy, but with different proposals and sets of problems.

"The only characteristic I recognize from partisan conservatives such as Sean Hannity, Rush Limbaugh, Mark Levine, and others is pride with regards to Obama's health care reform and stimulus package."

I think you might want to rephrase the "...is pride with..." part. It may leave the reader thinking those conservatives are proud of the health care reform. I think you mean they are too proud to accept Obama's health care reform.

There's definately a sense of selfishness and ignorance, although they may not intend to come off that way. The Republicans (as with any party) do not want to look like losers in the Democrats time to shine. They aren't going to budge. They are a 10,000 lbs. gorilla named filibuster.

"Now it may seem, I'm completely bashing the Republicans here, but I am nowhere near a liberal, however, given the certain circumstances, I do believe that the direction Obama is trying to steer toward is the right one, and let's not forget, he is trying to do something, at least."

I guess so. The economy is starting to level out.

"Max, I do not want any abusive, power struggling, oppressive government than you do, but it's highly unlikely, that Obama is going to filter ALL of his "socialist/fascist" policies through Congress with ease."

I don't think anyone with a mind would say they support totalitarianism in America. Republicans are pretty extreme in saying that Obama is a socialist. They might as well say that to Franklin D. Roosevelt.

"What's the point of having the strongest military in the world if the latest and greatest weapons, defense contractors, and PRIVATE security firms (why are you attacking PMCs?) are left without funding?"

Max isn't saying that we should have the strongest military in the world. I think he is saying that the military doesn't need all the technology that it is developing. As for defense contractors and private security firms, I never liked mercenaries anyways, so I could less about funding them.

LahaRulle said...

This is going too far for me to even try to add more comments than these two that I feel I should make:

1. To Max, in light of his views on health care: How can I even begin to prove my point to an immoral person?

2. The comments are, in my opinion and the statements Mr. Silton made today in class, far too long.
I do believe all of these are at least as long if not longer than my original post. If you have so much to say, write your own blog.

-Ilan Seid-Green

The new Kevin (a.k.a Kevin Kwan) said...

Anders, everyone can agree on the fact that without the loans, customers would not be able to acquire a house. The people who can't afford buy a house knows that they are unable to pay back the loan. Banks knows this too, and that is why they are guilty. Both participents of the loan know that the loan-receiver can't pay back the loan, yet the lender decides to lend the money anyways. By doing so, they are condoning or giving the ok for the lender to spend. The person receiving the loan assumes that buying the house with a loan that he/she can't pay back is ok because he/she assumes that the bank knows what it is doing.

You can't blame the buyers who had received the ok signal to buy a house with a loan that they can't afford when a higher financial authority gives them the approval.

"Your analogy about the kid is not only wrong its also insulting as you are suggesting these people are so idealistic and uneducated they have no idea that candy can make you fat...(or loans need to be repaid)"

Your line of thinking suggests that this is true. If the "people are so idealistic and uneducated they have no idea...(or loans need to be repaid)" then they WOULD go and take out a loan they couldn't pay back, which is exactly what you said they did.

Anonymous said...

First of all, bravo to all of you for being so articulate. I know that last year half of the comments were along the lines of "republicans suck" "I agree with the commie who wrote this post" and so on. On that note:

I would argue that the best course of action for the Bush administration, as in the beginning of the crisis, would have been to do absolutely nothing. I know I'm going to get my fair share of flak from both sides by saying that, but I believe that if we had let Citigroup, Fannie Mae et. al., and GM fail, along with the countless investment firms that undoubtedly would have toppled, that the economy would have turned out better in the long run. It would have been horrible, to say the least, for a long while, but what we have now is government control of the largest auto maker, more than half of the capital that banks have in reserve is government funds, and the same, profit-driven investors in leadership positions at the countries biggest banks and industries. According to a true free market, those people's companies should have failed, GM should have gone away twenty years ago, and greed should have stricken back by intelligence and good long-term research.

On another note, I believe that it is the consumer's fault. Sure, some of the loan officers didn't make the terms as clear as day, but it's a well held rule that you don't sign something as important as a mortgage agreement without knowing exactly what that agreement entails. That is not the fault of greedy businessmen, but of lazy Americans. That said, people who were genuinely misled should be given interest rate breaks, but if they cannot afford to pay the initial rate, then tell me please what they are doing in a house? It was Bill Clinton that started a program encouraging everyone to buy a house thirteen or so years ago. Now I hope he is on his knees praying that no one blames him in any part for what has happened in the last two years. Well...maybe he won't be on his knees.

Also, even people who cannot afford good, private insurance can still get Medicare. There is no excuse, except perhaps laziness, for someone not to have health care. Our infant mortality rate aside, we have the highest concentration of board-certified specialists in the world in this country. You know why? Because they get paid. Lots. America attracts the best and brightest neurosurgeons and the like because of the sole reason that we do not have government health care.

On a completely unrelated note, SHUT UP ABOUT THE ARTICLES! I know you guys are studying it now, but please, spare me. Also, there is no reason, whatsoever, that the DJIA should be rising. news flash: nothing has changed. nothing. This is a huge, huge sucker rally, one that will either continue growing more slowly than GDP until they reach equilibrium, or will crash again, hard. Obama, in all of his infinite and divine wisdom (sic) really hasn't done anything at all to save the economy. All he has done is to encourage consumer confidence where none should exist.

And again, on a completely unrelated note: no matter what comrade Silton said in class today, I cannot be beaten. never. So give me your best shot.

Anonymous said...

Hey, whoa, Ilan. calm down. I am not, nor will I ever be, immoral. I just don't think that it is the government's prerogative to provide health coverage. If you want to go and start a non-profit that gives the poor insurence then by all means, be my guest. Hell, if you're a 501(c)(3) I might even donate.

Anders said...

Response to Andrew's post starting at However.

Sorry but this entire line of thinking is fundamentally flawed. The entire idea that a bailout is obvious and necessary is counter productive. The fact is that in a capitalist environment businesses go out of business because they are run by individuals instead of the government and that is a good thing. Even in rapid economic expansion businesses go out of business all the time because there is something wrong with them. Perhaps their product is substandard, their workers are incompetent, their location choice is poor. Whatever the reason they fail.

Failing businesses are the things people don't talk about in economics because they are obviously things we want to avoid. Yet the great part about it is the fact that when these businesses do fail new life sprouts. If Apple were to suddenly go out of businesses you know what everyone would ask? Who is going to buyout the company? Because that is what would happen, a large enterprise would quickly swoop in to try and buy the company in order to turn it around and make a profit. The idea is the same. These large banks that failed, many were swallowed up by other banks because these banks that bought them were NOT in economic trouble. Here's how you avoid government interference and the concept is both simple and brilliant. YOU LET THEM FAIL. Now I know zomg what?! Let them fail!? But but...wahhh wahhh. Hush your crying, don't worry, another responsible company will come along and take care of them. The free market economy is a grand thing when you think about it, in the grand scheme you have to realize how it works. The only reason any other business would buy this now defunct bank/corporation is because THEY think THEY can turn a profit. If your lemonade stand is going out of business because your management did something wrong and I think I can do better, I'm gonna buy you out.
But but...what if no one wants to buy this company? Well that's a pretty good indicator that everyone else looked at that bank and said...wow I really don't want anything to do with them, they screwed up royally. Well...if everyone else can see these guys are not good, why would we want our government to prop them up and infuse them with capital? It's like some big joke where everyone can see this company is a bust except the government who comes riding in on their white horse and throws saddlebags of money at them while everyone is watching this snickering. It's ludicrous.

Now you can say, but if Bank X fails, no one will be able to get any loans!!!! Ah but that's the beatiful thing about capitalism, we have more than one banking system, we don't have an exclusive government banking system but we have MANY banks. So if you can't get a loan because your bank went out of business, I'm guessing if you deserve one and your credit history isn't garbage Bank Y across the street will be happy to lend you some money.
Don't get me wrong, it's not all rainbows and lollipops. Someone messed up here, someone screwed this company, that's who is responsible. Whoever is accountable, be that the CEO, the board of directors, whoever, that's who needs to be immediately fired and receive absolutely no money when they leave. If you drive a multi-billion dollar corporation into the ground you don't get any paid vacation.

Besides assigning blame though, the core part of this debate lies at a government intervention level. Quite clearly my stance is very anti bailout because you don't pat a dog on the head when it pees on the couch and you don't give a bankrupt company more money to lose. The idea that life can't go on without these important hallmark companies of America is horribly flawed and we need to realize that this is why capitalism works, a pursuit of money DOES end up helping the economy and drives down costs. What's that car commercial? When companies compete you win? Maybe it's a bank commercial, either way
it's pretty accurate.

Anders F-R

The new Kevin (a.k.a Kevin Kwan) said...

Laissez - faire presidents did nothing during the Great Depression. Did that get us anywhere? Nope, the economy showed no signs of improvement. Sure, the New Deal wasn't a total success either, but it did provide some relief, such as unemployment. If memory serves, unemployment dropped from 25% to 17% as a result of the New Deal programs. Ultimately, we all know that it was WWII that dragged us out of the depression, but Americans aren't in a mood for another war.

The loan officers and their superiors should not have presented the paperwork to people who they knew could not afford to pay them back in the first place. My point is that a financial authority like a bank makes it seem okay to purchase a house even if the income is lacking. Going back to my analogy, if a kid receives money from his parents to buy candy, he assumes that the parents gives him the approval to do so as well, thus he shifts responsibility to his parents. The same concept applies to banks and their clients. People tend to disregard common sense and responsibility when an authority tells them it is okay to do something. In the context of the economy, that authority is the bank because it is the bank that loans the money. Banks were at a financial stability to say no to people who couldn't afford to pay them back.

So a person who is need of treatment now needs to wait until he or she is 65 before she/he receives help? Remember that Medicare doesn't kick in until retirement. Assuming that the person survives until he/she is 65, the cost of treatment would be even more expensive because of the ailments and complications that accumulated over the years. Sure, we have all the experts, but they aren't available to people who are under 65 and/or can't afford insurance. It's hard to disprove that because (for example) our infant mortality is high for a country with so many experts.

"Our infant mortality aside,..."

That's not a good way to undermine that fact.

Now, I have to do my other homework.

Anders said...

Ilan you basically drove a drill into the very essence of the healthcare debate and adressed many of the most volatile subjects when it comes to party politics and your surprised that people have long and complex answers? In all honesty you should be thrilled that we can get this level of participation on a subject for school, long posts are inevitable.

Kevin come on, you and I both know it's not up the corporation to police the customers actions. Fast food restaurants won't stop selling fast food to fat people because of moral anguish. Even better if they did they would be sued for being discriminatory. You can't hold the company accountable in such harsh terms because even if they knew what they were doing was dumb other people still had to sign on the dotted line. We can argue percents about who was what percent responsible forever and get nowhere, the bottom line is that individuals must be accountable or face the consequences.

I already adressed the point about being idealistic and uneducated, they made a mistake and they are responsible, that doesn't mean they are uneducated like your example suggests.

Your post just screamed trust the bank they have your best interest at heart nobody would ever try to wrong you. Just because a higher banking power says this is a good idea doesn't mean anything without some fact checking, you can't accept anything as true without proper research. Just because Nike says or even SUGGESTS these shoes can make me run as fast as a professional athlete doesn't mean I'm gonna buy them without reading others opinions, looking up how they are made, and trying them on. Common sense goes a long way, neither the government nor big business is responsible for yours.

Anders F-R

Anders said...

"People tend to disregard common sense and responsibility when an authority tells them it is okay to do something. In the context of the economy, that authority is the bank because it is the bank that loans the money."

Heh just proved my point nearly word for word. This is exactly what is wrong with this situation. If you aren't responsible for your money and your mortgage and your house who in the world should be? You want the government to step in and regulate these questionable home sales and they probably will, what I want is perhaps overly idealistic but I want that to be unnecessary. I want people to be the bastions of reason humans should be and apply their common sense to every problem not just some of them. BUT in this regard it is truly inexcusable, buying a house and you can't be bothered to even get a few second opinions, do a little research, READ THE CONTRACT? The government can only hand hold so much before they choke our economy and the dispute over how much is too much is a controversial issue (obviously).

Anders F-R

The new Kevin (a.k.a Kevin Kwan) said...

Anders, companies swallowing up other companies is what I'm suspicious of.

It's not a beautiful thing when you think about it.

This destroys competition and puts the so called "free market" in the hands of a few executives. There's no free market when a small business is started only to become stomped on by large businesses.

"When companies compete you win? Maybe it's a bank commercial, either way
it's pretty accurate."

There is no competition when the monopoly at the top of the food chain chomps up everyone else at the bottom and defecates them out.

A market controlled by a monopoly or a regulated market to prevent monopolies and trusts.

Your pick.

Now I really have to get going on my other work.

LahaRulle said...

Anders, I truly appreciate that you think my post was so thought provoking. But.... comments that are 3 times my post lengths? It seems to me this is more a discussion for a forum than comments on my blog, especially considering Mr. Silton's statements on appropriate comment length. I also think that many of you seem to have strong enough and well thought out enough opinions to write your own blogs, were you so inclined.

-Ilan Seid-Green

LahaRulle said...

Also, I feel that it is my job to read the comments on my blog post (Mr. Silton also stated that this is good), but with comments of this length it simply isn't possible. I am quite overwhelmed and quite unwilling to go through and make reasoned arguments defending my position to all of these.

Anders said...

Aragon Hitchhikers forum? Make it happen Commissar. I dunno if you throw this into a word document it really doesn't come out as long as you might think but I understand, it's just difficult to be both concise and understood. Pretty obvious your responding to these posts and not all posts will have this much debate, I wouldn't worry about defending everything you write.

Kevin come on now no one mentioned monopolies or trusts and that's not what I was implying. I don't want all power in just a few corporations, I want quite the opposite, yet DURING the crisis that won't happen. During the crisis companies will be swallowed up, AFTER the crisis new and smart companies will be started to make up for those that collapse. If there is a market for it someone will make a company to fill that market, capitalism is a great system like that. The fear of monopolies is not one I'm concerned about in the next 50 years.

LahaRulle said...

Haha. Actually Anders, I've thrown them all into a word document. You can take a look at the word counts tomorrow when I bring it in to class.

-Ilan Seid-Green

Andrew said...

I'll try to keep this as short as I can and then I'm through for good, but back to what Anders was saying.

"A perfect analogy would be who is to blame for a child being fat, the kid who purchases candy and soda or the parent who gives the money to the kid?"

Both. The parent is careless and the kid doesn't have a sense of what is right or wrong? If people can't think for themselves, why not have someone think for them?

Am I joking?

MODERATE government-regulation is a must. I've read parts of the Communist manifesto and while Marx is pretty irrational on some levels, if not most, he does get one thing right. Aspects of capitalism and or free-market, is absolutely and irrefutably disgusting, especially when businesses abuse their customers and gain profit for themselves. Business SHOULDN'T fail. Enforcing success and integrity is fundamentally flawed? Businesses mislead people on purpose, and yes, while people, somehow, still manage to buy into their fake advertising, whatever it may be, it's still dirty.

Jack Rogers said...

“You talk about acquiring money in the form of a loan, yet a loan by definition is simply borrowing, these people didn't earn this money, they wanted these companies products and they borrowed money in order to get it. If I borrow a thousand dollars from the bank to buy a guitar and this guitar doesn't work as advertised who is accountable? If it's the guitar makers fault he is responsible, if it's my fault for not doing my research I'm accountable. Nowhere along the line is the bank/corporation responsible.”

Uhhh dude, your analogy is way off. It would be correct if the houses that the consumers had bought with loans from the banks were defective or broken in some way. Then, of course, it wouldn’t be the banks responsibility or fault. However, these banks were predatory lenders, pushing sub-prime mortgages not only to people who wouldn’t qualify for a traditional mortgage but also to people whose credit scores were high enough to qualify for a traditional mortgage. In October 2007, the WSJ reported that 61% of people with sub-prime mortgages had credit scores high enough to qualify for a traditional mortgage. These people were misled so that the bank could make a profit, and this caused many people to default on their homes, and it caused current the financial crisis. Many of these sub-prime loans were given to people who, if interest rates rose, the banks knew would have to default on the mortgage. Thus, it is partly the consumer’s fault for entering into a mortgage that was too risky, but also the banks fault for incurring this risk and giving these loans out like candy and misleading consumers, which, when the bubble collapsed and interest rates did rise, eventually led to huge foreclosure rates, the sub-prime mortgage crisis, and the recession.

The new Kevin (a.k.a Kevin Kwan) said...

"AFTER the crisis new and smart companies will be started to make up for those that collapse."

Only to be quashed or bought out by the existing larger companies.

"If there is a market for it someone will make a company to fill that market, capitalism is a great system like that."

New markets don't just pop up from anywhere. The are likely to branch off an existing industries and markets. With that said, large companies that dominate over a certain market will likely take notice and expand towards the new markets that develop.

You can't hold people accountable because they shifted responsibility onto the banks. It is quite natural for people to listen to a higher authority. It's hard for most people to think on their feet when an authority suggests otherwise, especially one as influential as the bank. You should know this because you've been in AP Psych last year. Do you remember the Stanley Milgram experiment? The lesson to learn is that you can't really count on people to stand on their own two feet. And there is nothing that could really change that attitude. However, on the other hand, banks have to power to deny people loans because of their inability to pay the bank back. The banks have the financial stability to refuse giving loans; they don't need to sell sub-prime mortgages. People without houses are desperate; if something sounds too good to be true (sub-prime mortgages), they are willing to believe it.

Yes, not ALL the blame goes to banks. Buyers share a part of the guilt, but lending institutions share a bigger part of that guilt. As Jack pointed out, some of these shady lenders have misled the buyers into thinking it was a safe loan and raised the interest rates on those loans to make a profit. I'm sure the mainstream banks that failed (Washington Mutual) might also fall under the category of banks that gave out these loans.

A logical thing to do would be to ban these kinds of sub-prime mortgages. Only prime mortgages should be allowed. I'd like to see the free-marketists try to answer to this kind of regulation.

William C said...

The whole blame game doesn't work at all because in the end it is nobody's duty to be responsible (in this case for the economy). Even if people knew that they would be unable to pay off loans for homes, people can't pay back loans all the time. It just so happened that a lot of this happened in a small time window. Every customer is just looking out for their own immediate interests. How realistic is it to expect individual people to weigh in their effect on such a big economy? How realistic is it to expect banks etc. to do the same. The big picture belongs to nobody and it comes down to an "oh, I thought you were going to be the responsible one" scenario. Being responsible for the sake of philanthropy doesn't pay bills, so when we have a laissez-faire, capitalist economy, a side effect is what we have now.

Nobody can be blamed. The system has shown its true colors and the problem does not lie in the pawns but in the game. The bad idea was even introducing deficit spending. The bad idea was having a currency that is based on a stock market gamble. I think what we have now is a chronic result of bad decisions made long ago by a government which should have instituted more regulations on the economy. As it is, the whole thing is a mess and the time when government intervention could help is long past.

Trying to fix the economy now is indeed a waste of money, time and everything else that is thrown at the problem because current economic infrastructure is like a bucket without a bottom. I say we rough it out and let the proposed Darwinist economic theory run its course.

Anders said...

Andrew: Corporate greed is merely an expansion of human greed. You could easily argue that as long as humans are flawed their businesses will be flawed. Going with this line of thinking leads to the conclusion you guys are jumping to, if these companies are so terrible, we must put strict government regulation into stopping them, your sense of justice goes into overdrive and you start arguing from your morals not your logic. I take the thinking one step further and go into what would happen if we DO have this large government regulation. The fact is that every material thing you have in life is due to a capitalist society. Blame Apple for using foreign labor and price gouging (no clue if they do) but then throw away your Ipod. Whenever I hear about these injustices and the way people want to deal with them I shake my head. Your government regulation, who is going to pay for monitoring it, who is gonna determine what regulations need to happen, who is going to defend the rights of the company? Yeah on your moral vendetta let's see some thought about those questions as well as the companies responsibilities to its customers and its stockholders and how those play into your regulations. Just because you guys think we need to stick it to the man doesn't mean you can ignore what happens after the man starts losing profit and then starts getting slammed by economists for doing so poorly.

Jack: While your summary was an interesting read you missed several key points. First of all your armchair lookback at the economy does not help us going forward. Pointing out the flaws in a system and narrating an event one year later does not make you insightful. The plain fact is that people were not expecting this to happen and banks were not expecting the insane number of foreclosures that occurred. Sure you can call foul on some cases where information was inadequate but overall your summary is lacking key background information. 61% could qualify for a traditional mortgage? If that was the case you would think they would have chosen the normal mortgage. That wasn't the case because subprime mortgages LOOK better to people. Traditional mortgages have higher down payments, higher monthly payments because their interest rates start higher while subprime starts low and is yanked up several years after buying the house. So even if they were shown both mortgage rates, if people didn't do their research and didn't think about it they would still choose the subprime because of appearances. Sure you can blame the company for making these subprime look all low priced and cheap but in reality they do it because these people with low credit scores are normally high risk and a danger to lend to. So why give out subprime loans at all? Even people who can't pay back the loans want a house, not an apartment, they want a house, so they will opt into less safe mortgages and not think about the consequences. Again if there is a market for a product companies will fill that market, and subprime in general is a risky business but poorer people want houses too and someone is gonna sell to them.

Anders said...

"You can't hold people accountable because they shifted responsibility onto the banks. It is quite natural for people to listen to a higher authority. It's hard for most people to think on their feet when an authority suggests otherwise, especially one as influential as the bank."

LOLOLOLOLOLOLOLOLOLOLOLOL you can't hold people responsible because they bought a house they couldn't afford with money the didn't have and without properly doing their research or thinking for themselves. Yeah OK guess we can never ever hold anyone accountable for their own actions. Kevin this is such a joke, when would you hold someone accountable? What would it possibly take to make someone take some personal responsibility? Obviously buying a house isn't large enough of an issue to warrant some accountability.

"AFTER the crisis new and smart companies will be started to make up for those that collapse."(me)

Only to be quashed or bought out by the existing larger companies."(Kevin)

Horribly false, many would argue that economic slowdowns benefit small business even more. Your large big trusts and conglomerates chomping up small business and dominating the country is a figment of your imagination and nothing more. See link below.

http://www.smallbusinessnotes.com/aboutsb/recession.html

William: "Every customer is just looking out for their own immediate interests. How realistic is it to expect individual people to weigh in their effect on such a big economy? How realistic is it to expect banks etc. to do the same."

Maybe it isn't realistic to hold them accountable for the economy but they are sure as hell accountable for themselves. If I buy a house and I can't pay for it and I foreclose I'm responsible. If I don't do the research to know I can't afford this house and know I'm gonna have to foreclose I'm doubly responsible. Banks aren't responsible to themselves but they are to their stockholders and all their customers who rely on them. The idea that they aren't responsible is inane. Why am I gonna put my money into your bank or take out a loan if at the end of they day you say your not responsible and yell surprise and take my paycheck. People need to be accountable for their own life, banks need to be accountable for their constituents.

Funny how everyone only slams Wall Street when something goes wrong, when Wall Street makes us the number one economic force in the world no one says anything. When Wall Street expands our economy, inserts trillions of dollars into peoples pockets, when Wall Street allows people to invest their money and allow it to grow for retirement...no one says anything. You can't even begin to fathom the role of the stock exchange on this country. Again with the regulations, show me, please, show me the regulations that will fix the corporate drive to make money without losing the corporation money...

Will I don't want a pure capitalistic society, Darwinian economics might make the most money but at that point it tramples on small business which is a mistake. The balance between economic regulations and free market is very delicate, I'm merely trying to stop everyone from being blinded and overregulating and driving businesses into the ground the other way.

The new Kevin (a.k.a Kevin Kwan) said...

"LOLOLOLOLOLOLOLOLOLOLOLOL you can't hold people responsible because they bought a house they couldn't afford with money the didn't have and without properly doing their research or thinking for themselves. Yeah OK guess we can never ever hold anyone accountable for their own actions. Kevin this is such a joke, when would you hold someone accountable? What would it possibly take to make someone take some personal responsibility? Obviously buying a house isn't large enough of an issue to warrant some accountability."

People are accountable for their own failures, yes. But that's not what I'm arguing about.

This is what I was originally arguing against:

"This crisis was caused, at least initially, by people who probably shouldn't have bought a homes in the first place..."

With emphasis on the the word crisis.

Banks and shady lenders had a larger share of the guilt for CATALYZING the eventual recession. As I recall, the economic downturn started from a ripple effect in Wall Street. It obviously had to do with the banks. Who's accountable for banks losing money? The banks/lenders are.

Small businesses don't thrive in the recession with credit crunches and risen interest rates. Who depends more on a loan, small businesses or big businesses?

"Again with the regulations, show me, please, show me the regulations that will fix the corporate drive to make money without losing the corporation money..."

Banning these sub-prime mortgages would prevent lenders from repeating the same mistake. Overall, we are saving those lenders money by not allowing them to give loans to people who can't afford to pay them back.

Anders said...

"Banks and shady lenders had a larger share of the guilt for CATALYZING the eventual recession. As I recall, the economic downturn started from a ripple effect in Wall Street. It obviously had to do with the banks. Who's accountable for banks losing money? The banks/lenders are."

Again if you could have predicted this housing market crisis you would have had psychic powers. These banks were out to make money and give loans in order to make that money. It's not good business for their clients to foreclose. These banks didn't go out and try their hardest to get people who would foreclose in order to drive themselves into bankruptcy. People have been taking out subprime loans for years and years and this huge mass of people foreclosing is something never seen before. You could say these banks should have known many of their clients would foreclose but nobody knew this was going to happen on such a large scale. So your blaming of the banks for not being accountable has a sketchy truth at best, the people who took out these loans are fully accountable because they should have known exactly what they were buying but they didn't.

"Small businesses don't thrive in the recession with credit crunches and risen interest rates. Who depends more on a loan, small businesses or big businesses?"

Did you even read the article I linked? The fact is small business is perfectly handled to combat recession because of their flexibility and small scale business. Large corporations can't handle economic depressions as well because they can't change their costs, their goods, their staff nearly as easy as small business can when they start losing money.

"Banning these sub-prime mortgages would prevent lenders from repeating the same mistake. Overall, we are saving those lenders money by not allowing them to give loans to people who can't afford to pay them back."

Where is this misconception that everyone who takes out a subprime loan auto defaults? Honestly I've already talked about them banning subprime loans and my views on that. The fact stands that the reason banks would ever give out subprime loans is because it is profitable and people want them. If they lost money for the bank or people didn't want them there wouldn't be any of them. So while perhaps stronger regulations on income reports or credit score are required to prevent people who can't afford them to get loans banning them completely is both unlikely and probably a bad idea.

The new Kevin (a.k.a Kevin Kwan) said...

"These banks were out to make money and give loans in order to make that money."

What money is there to be made off of people who can't pay off the loan? The banks were wrong to give loans to risky individuals, and they knew that. Whoever possessed the deeds to these loans would not be earning a profit, and banks knew that.

The banks may not have the whole picture of what would result from their actions, but they should have a clue that what they were doing is dangerous.

They knew that the sub-prime loans they offered to individuals that lack the money to pay back was risky. They knew that by selling these toxic sub-prime loans to giant investment banks, they would cause the investment banks to lose money on their investment. They knew that enough loss in investment would cause these investment banks financial catastrophe. It doesn't take hindsight to figure this out. Despite this knowledge, the banks continued to issue these loans.

"Did you even read the article I linked? The fact is small business is perfectly handled to combat recession because of their flexibility and small scale business. Large corporations can't handle economic depressions as well because they can't change their costs, their goods, their staff nearly as easy as small business can when they start losing money."

I read the article, and it was very vague on how small businesses are flexible.

Large corporations can change the costs of their products very easily. Why do you think there is not a single Walmart in SF? They have been banned because their cost-cutting techniques would starve small,local businesses of business.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/07/13/BAG45JU7PR1.DTL

Corporations like Walmart are very flexible and varied in their products. Walmart even sells live, pet fish in addition to groceries and products that a conventional store is expected to sell. Small businesses don't have this level of flexibility and thus variety in their products.

You really don't need me to explain to you how easily superstores (or large corporations) like Walmart can change their employees, do you?

"So while perhaps stronger regulations on income reports or credit score are required to prevent people who can't afford them to get loans banning them completely is both unlikely and probably a bad idea."

Alright, so it was a bit inaccurate for me to say that sub-prime mortgages should be banned because people who take these loans are unable to pay back. There are people who can afford a conventional loan, but took out a sub-prime loan instead. But you know "stronger regulations on income reports or credit score" is what I meant. Even then, this is still regulating the market.

"Kevin come on now no one mentioned monopolies or trusts and that's not what I was implying. I don't want all power in just a few corporations, I want quite the opposite, yet DURING the crisis that won't happen."

The point still stands - anti-trusts laws are regulations on the market.