Bailouts Which Led to Foreclosures and Short Sales
There have been bailouts during earlier time periods. For example, Lockheed in 1971 and Chrysler in 1980 were accepted because of the fear factor that the administration portrayed. In five out of seven elections from 1980-2008, Republicans won the oval office. Congress was controlled by Republicans until 2006. Regan led the way for the reduction of costly regulations. He felt that due to the regulations, the cost of doing business was complex, time consuming and expensive. Unfortunately, no one was watching when the last regulation, which repealed the Glass-Steagall Act (1999), led to the Gramm-Leach Bliley Act. Before this act was repealed, bank holding companies could not own other financial firms. In this new environment banks and financial companies became huge - too large to manage and too large to fail. Warren Buffet warned, in his Berkshire Hathaway Annual Report, that the growing financial institutions could lead to the destruction of the whole economic system. But no one heeded his warning.
Now with the Republicans at the helm, we began a year of bailout after bailout (The TARP plan), which included Bear Sterns, Fannie Mae/Freddie Mac, Citibank, Merrill Lynch, Bank of America and AIG with all of these being funded by the American people who had already begun to suffer. These companies were similar to a set of dominoes. Lehman brothers wasn’t saved, which caused AIG’s crash and hurt the Reserve Primary Fund. This cost the tax payers 15 trillion dollars. Still all these properties had to be foreclosed on.
This Catastrophy Was Caused by Excessive Risk Taking
This financial catastrophe was caused by excessive risk taking, bad accounting, inept risk management and a massive use of leverage similar to the stocks before 1929. Two of the people who decided these bailouts were needed were Bernanke and Paulson who thought without them turmoil would be created in our financial markets and throughout the world. I’m asking you isn’t this what happened? Of course, they did save Japan’s central bank, Saudi Arabia’s holdings, funds in China and England and many more. We were not only bailing out our companies, but preventing foreign financial institutions from failing. Remember, all our countries deficit is financed by foreign entities.
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