Banks, Bankruptcy, and insurance

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The recent federal government events that involve AIG and Freddy Mac, have made me start watching the news again. I realize how much I hate the news. People on CNN call for reform, Fox is asking the federal government how much help is too much, and NPR is wondering why we are helping the bankers. Overall they are blaming these companies for their practices and what they have done.

My own opinion is that we have a situation where the banks are only partially to blame. For years they have been using mortgages as a tool to have a solid return. They assumed that you and I valued our homes and would be willing to live up to our agreement and pay back the mortgage. The change in the recent years has been that we have not lived up to our agreement and are defaulting on mortgages.

So one of the main reasons for this “bail out” is us. The United States Citizens, we are as a group not paying back our debt. Therefore, the holding of these banks are falling in value (in some cases .22 to the dollar). We then, (news media) critique these companies for what they have been doing. Holding mortgages as investments, which was a common practice. But since we are not fulfilling our obligation these companies cannot fulfill theirs.

I am not saying that the banks are not to blame, they were part of the problem as well. They allowed people to get mortgages for 400k homes when a person was making 40k a year in salary. Of course a person who is making that much money cannot pay back the loan. However, the more I look at what happened I start to think it was our greedy society. More for less and we don’t care what it causes.

I think the bail out is a good choice, we can’t have our main underwriter and mortgage holders go under. Help them weather the storm and put in tools to help the banks get the right people the right loans and we may be able to make a come back. It is just going to take a while.

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