Problem is….we have been talking about that. Everyone has been for a long time now and our government doesn’t listen. Our Republican government only started caring about the economy when THEIR stocks plummeted. When thousands of homes were being foreclosed, parents had to choose between feeding themselves or their children, and elderly were suffering because they couldn’t afford their meds, OUR GOVERNMENT DIDN’T CARE. It wasn’t until the crisis got so bad that it started touching their lives that they stood up and said enough! In my opinion, this failure to act epitomizes what the past eight years have been for this country: a selfish, self-serving administration who would rather care for their cronies than the least of these.

I suppose some would argue that the reason this bailout is seen as a pressing crisis, moreso than regular people having their homes foreclosed, is that if this bailout doesn’t pass, absolutely everyone is going to be in serious trouble. Small business people won’t be able to get short-term loans they depend on, the middle class and working class won’t be able to buy necessities on credit, etc.
But Eric’s larger point is true: If the Bush administration had been better stewards of America’s wealth and America’s regular people, we wouldn’t be in this mess. Deregulating the stock markets only exacerbated the rampant greed on Wall Street. And now, instead of taking care of the needy in society, like working to provide poor children with basic health care, the Bush administration is cushioning the fall of Wall Street fat cats through this bailout. It is absurd a lot of House Republicans tried to keep golden parachutes as part of the bailout bill. How unconscionable.

The problem is this is no longer an issue about bailing out the bankers (if it ever was the issue).
Andrew Jackson most likely had it right. Loose lending standards by bankers fuels rampant speculation. When times are good, economic activity increases to unsustainable levels as stories and observations of speculators making money draws more people in to make even larger bets. We cannot miss something here deeply ingrained in human behavior. We want more and we want our share. Yes, it is both greed and coveting what others have that leads us to ignore rational thought and bet on big rewards. Deregulation added to the explosion of lending opportunities by delinking borrowers from the neighborhood bank where the president and local shareholders of the local institutions understood that a bad loan comes out of their pocket. Instead, the system was converted into one where everyone involved on the lending side was being compensated through commissions or bonuses based on volume. This is a conflict of interest. Again, our sinful human minds can rationalize this away but there is no doubt, the system promotes behavior to do whatever it takes to get a loan completed.
But somebody has to buy the junk. Leave it to the highly paid financial engineers on Wall Street to take care of that. First, based on studies of past behavior, it was shown that people will do everything possible not to default on their mortgages. This led Wall Street to resell packages of risky mortgages to investors as if they were high quality. Think about this because it is important. You create a market to sell investors these mortgages because they are high quality. The presence of that market in turn allows the local bank to make their money not on the repayment of the mortgage, but on the commission earned by writing the mortgage and selling it to Wall Street. How much is the local bank going to care about getting paid back? They are going to care about finding people to lend money to knowing they can get paid up front. While this is simplistic, this happened across all lending in American resulting in an artificial boom in real estate and subsequent crash, especially in areas of rampant speculation (Arizona, Nevada, California, Florida) as well as cities such as Detroit where lower income people were qualified for mortgages they could not repay. As an aside, it is offensive to listen to mostly Republican criticism that community reinvestment initiatives are responsible for our problems today. Most of the loans were not large amounts but the fees were. It was not unusual for a lender like Countrywide to have fees and charges well over 10% of the loan with high adjustable interest rates. If many of these people had access to terms like some of our elected officials and officers of Fannie Mae and Freddie Mac were able to garner, they may never have lost their homes.
So, do we let those who fed at the trough suffer? The problem is this is a credit crunch and no longer about mortgages or getting a loan. Severe credit crunches more than any other event are responsible for severe economic hardship. The lack of credit forces business to contract and layoffs to occur. It forces less consumer spending which in turn lessens demand for business goods and services with resulting layoffs. It creates downward momentum which is difficult and takes time to turn around. Excesses by a small fraction of the economy can affect Main Street. Free markets will solve the problem, but with great pain. Government has a responsibility to try to do better for all of us.