Saturday, January 03, 2009

A Few Brief Thought On The Economy

I read a piece earlier today on student loans and the developing issue of the contraction of the private student loan market. And it got me thinking how this crisis, how the entire financial crisis fits very neatly into my theory that Americans today want all the good and none of the bad. This attitude has become so prevalent that even in the face of a financial crunch directly caused by it, the attitude continues to persist.

As home prices have fallen dramatically as part of the markets response to the crisis, the government has responded in all their wisdom by saying we should prop home prices up. This, despite the fact that the steep decline in prices is a direct response to the contractions in the financial markets. As I said, we want it all. Our thoughts on student loans tend to be the same- the government wants to ensure access for everyone no matter what the nature of the investment.

It seems to me that the market response to these various financial crises has been to tighten up lending standards, what seems to be a quite logical response. If this crisis was basically caused by the over extension of credit, surely the appropriate response is a reaction the other way. The problem is, the government's response has been to view this credit crunch as a problem it needs to attempt to solve. We want everyone to have it all, but we don't want to have to pay for it.

1 Comments:

Anonymous rose said...

Couldn't have said it any better. Look at TARP. TARP is neccessary because banks took excess lending risk (government induced in many cases).

So we introduce TARP as a measure to HELP banks sure up their balance sheets, although they're all still far from ideally capitalized and need to go through a long deleveraging process in order to be safe.

Now banks are in the process of de-leveraging and trying to prepare themselves for any additional problems going forward and are recapitalizing and being very conservative in their lending practices and Schumer and Frank are pounding away at them to lend.

We want affordable housing!
We want more conservative and more regulated banking!
Here's some TARP money, now you're trying to be conservative and protect yourself...f that gogogo lendlendlend!

It is a fucking joke.

This is why the republicans can't go moderate. You can't win against a party that promises everything by promising mostly everything.

1:49 PM  

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