Bailout Bill Fails House Vote

[KSig RC]

Originally Posted by KAPital PHINUst

America will experience a significant depression, bailout or not, but a bailout can make a difference between the depression for three years (without a bailout) and three decades (with a bailout). Just let it go, let the market correct itself, and everything will come out in the wash.[/COLOR]

This is specious reasoning at best.

Some of the bailout plans will actually pay for themselves over time, and by giving the market a firm bottom backed by the (still) highest-rated credit risk in the world, both the short-term and long-term viability can be ensured.

You're putting up a false dilemma - there are more options besides "this bailout plan" and "no bailout plan." Also, it's not "short term" or "long term" - it can be both.

Besides this, there really isn't this guarantee that the market will correct itself - while I wish there were, the current US economy is not exactly run by Adam Smith's Invisible Hand. In short, we've inbred many of the economic and production factors to the point where market forces may not, in fact, correct themselves - in which case, brief nationalization may be superior to lengthy failure and relying on other nations to resuscitate the US economy through outside investment.

[AGDee]

I've not heard this reason given for contributing to the mortgage crunch, but it certainly seemed to contribute, in my view:

Once upon a time in America, your credit card interest was tax deductible. The Tax Reform Act of 1986 eliminated this option. This is, in large part, what led to people taking out home equity loans in mass quantities as their home values rose dramatically in the early to mid 90's. It was pushed as a smart financial decision.. use that home equity to pay off those credit cards and THEN your interest is tax deductible! This is where I've seen a lot of people get into trouble. You roll those credit card balances into a home equity loan or a new mortgage and KEEP USING THOSE CREDIT CARDS. Then your home value drops and BAM. You owe more on your house than you can pay and you have a boatload of credit card debt to boot. Most I know have worked their way out of it, but it's getting tougher and tougher now.