What Next from the Obama Administration

The bank bailout was to go the strong banks so they could buy the weak banks. The government plan was to give the banks money in return for preferred non voting stock which could be sold when the bank was making a profit and the tax payers would benefit from the sale. Now they want to change it for common stock which means the people who have money invested in the bank will now have their investment worth less. The alternative was to increase the FDIC insurance to $250,000 and protect the depositors and let the weak banks fail and the investors lose their money, not the depositors. This is what happened with the savings and loan failures and the S&L that survived bought out the failed ones and the depositors did not lose their money, only the investor, who controlled the company, and took the risk and if run right they would have made a profit. No government take over of the banks.

Many banks that are on the edge are on the edge on paper only. For example if the bank holds the mortgages on 1000 homes and the people are all making their mortgages payments and the value of the homes declines then the bank is technically in trouble. If the people are still paying on the mortgages and the bank has money to lend where is the problem. There are some economic experts that feel the governmnet regulators caused this problem. As housing values started to decline the regulators went into banks and forced them to call in mortgages where the value of the property dropped below the loan amount, even if the people were current in their payments. Another cause of the current bank crisis is politicians spouting off and releasing damaging information, such as Senator Schumer (D NY) in his infamous letter about the Indymac bank. http://latimesblogs.latimes.com/laland/2008/07/feds-cite-schum.html If you look at the last Banking Crisis with the Savings and Loans you will see that the strong bought out the week and we made it through the crisis. However now the tow biggest failures were government created "banks" Freddie Mac and Fanny Mae. You had Rep Barny Frank tell everyone that they were sound and a good investment for people at a time when an auditors report showed they had cooked the books.

The only strong banks are the little retail banks that did not invest in risky ventures like subprime real estate. There are no strong investment banks in this country right now. I can't believ anyone would want to increase FDIC insurance right now. FDIC was formed by the Glass Staegall act and it reserves were predicated on insuring conservative retail banks. When Glass Stawas repealed, FDIC was forced to insure banks that were to risky and FDIC does not have the reserves to cover those deposits. If the banks that are currently teetering collapse, the only was FDIC will be able to cover the insured accounts will be if the government bails out the FDIC. When they do that, the taxpayers will own the banks and to turn those banks back over to the investment bankers would be unconscionable. I believe that in order to keep the savings of America, the government will natinalize the banks and eventually only retail banks will have FDIC insurance. That's the way it was for 60 years and it worked well. Investment banking will still be there for anybody willing to deposit their money and forfit FDIC insurance. PS All of the depositors involved in the collapse of the S&Ls did not recover their money and the cost to the tax payers of this country was 500 billion I believe. If Glass Staegall had been left in place, that bailout, the Paulson bailout and all pending bailouts would not have been necessary. The idea of not regulating the people who handle the money is preposterous.

I agree with most of this, this is a deep cut, but We could still recover from it as long as they don't alter the constitution in a way that changes how laws are formed and rejected. It is prety clear that there is a large portion of the country that will reject this stupidity as soon as we get a chance at the ballot box, there just need to be some conservative leaders on the ticket that are willing to stand up and reverse some of this. Again, I realize that there is a lot of damage being done, but unless we are taken over by China or wiped from the face of the earth by Iran, we will eventually recover. It just probably won't be in my lifetime.