RE: Fannie Mae/Freddie Mac - The Triumph of "Free-Market Capitalism"

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    Sep 08, 2008 12:42 PM GMT
    I'm so glad I live in a nation where the definition of free-market capitalism means allowing an organization/industry to get so large that to allow it to fail would decimate our economy, thus we are forced to bail it out with tax payer dollars.

    Even though the government took them over, there is still a chance that Mae/Mac's actions and stupid choices will still decimate our economy.

    If we really practiced true free market capitalism, these entities would never have gotten as large as they did. Competition would have kept them small and agile. Unfortunately, our Corporatist system has a government that bestows favor on certain organizations and penalizes others, rather than allowing the market to function on its own.

    If the government had stayed out of the market from the get go, we never would have had the robber barons of the late 1800s, the stock market crash or Great Depression, never would have had the Airlines get so large that we can't afford to have them fail. Same with the banking industry.

    Long story short, expect more government bailouts in the near future... We're F***'ed!
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    Sep 08, 2008 12:52 PM GMT
    History, you should read it.
  • HndsmKansan

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    Sep 08, 2008 12:54 PM GMT
    Nothing like over simplification
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    Sep 08, 2008 12:59 PM GMT
    Actually, I stand corrected, I just heard that Wall Street liked the bailout. Maybe we should just nationalize ALL of our industries and just go straight to socialism. They should really like that.

    And about history, well young pup, why don't you school me on what I have incorrect.

    And as to over-simplification, well, I realize I'm talking to Americans, so gotta keep things simple.
  • HndsmKansan

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    Sep 08, 2008 1:01 PM GMT
    conativejj saidActually, I stand corrected, I just heard that Wall Street liked the bailout.



    I'm glad you just heard that.
    The moment I heard the news I knew Monday would be one of the better single days in the market this year.
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    Sep 08, 2008 1:05 PM GMT
    Some definitions for those who don't know what the F I'm talking about:

    Free Market:

    Free market economics is closely associated with laissez-faire economic philosophy, which advocates approximating this condition in the real world by mostly confining government intervention in economic matters to regulating against force and fraud among market participants. Hence, with government force limited to a defensive role, government itself does not initiate force in the marketplace beyond levying taxes in order to fund the maintenance of the free marketplace.

    Corporatism:

    Contemporary popular (as opposed to social science) usage of the term is more pejorative, emphasizing the role of business corporations in government decision-making at the expense of the public. The power of business to affect government legislation through lobbying and other avenues of influence in order to promote their interests is usually seen as detrimental to those of the public. In this respect, corporatism may be characterized as an extreme form of regulatory capture, and is also termed corporatocracy, a form of plutocracy. If there is substantial military-corporate collaboration it is often called militarism or the military-industrial complex.

    Robber Baron:

    Robber baron was a term revived in the 19th century in the United States as a pejorative reference to businessmen and bankers who dominated their respective industries and amassed huge personal fortunes, typically as a direct result of pursuing various anti-competitive or unfair business practices. The term may now be used in relation to any businessman or banker who is perceived to have used questionable business practices or scams in order to become powerful or wealthy.
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    Sep 08, 2008 1:07 PM GMT
    HndsmKansan said
    conativejj saidActually, I stand corrected, I just heard that Wall Street liked the bailout.



    I'm glad you just heard that.
    The moment I heard the news I knew Monday would be one of the better single days in the market this year.


    So tell me why Wall Street is opposed to socialism? How is government bailout/control of Fannie/Freddie any different than government control of an organization in a socialist sense?
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    Sep 08, 2008 1:12 PM GMT
    conativejj saidIf the government had stayed out of the market from the get go, we never would have had the robber barons of the late 1800s, the stock market crash or Great Depression, never would have had the Airlines get so large that we can't afford to have them fail. Same with the banking industry.


    This is wrong. This is very, very wrong. What government intervention caused the consolidation of wealth and power? At what point and with what policy did government cause robber barons? Any high school history text book will discuss robber barons with the same breath as laissez faire capitalism.
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    Sep 08, 2008 1:19 PM GMT
    MunchingZombie said
    conativejj saidIf the government had stayed out of the market from the get go, we never would have had the robber barons of the late 1800s, the stock market crash or Great Depression, never would have had the Airlines get so large that we can't afford to have them fail. Same with the banking industry.


    This is wrong. This is very, very wrong. What government intervention caused the consolidation of wealth and power? At what point and with what policy did government cause robber barons? Any high school history text book will discuss robber barons with the same breath as laissez faire capitalism.


    This is why I included the definitions: "confining government intervention in economic matters to regulating against force and fraud among market participants"

    Rampant fraud was common place in that age, and yet the government looked the other way because they were bought and paid for by these same industrialists. Hell, one of them is still in office after all these years: Rockefeller.
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    Sep 08, 2008 1:21 PM GMT
    What should government do then? Regulate the market to prevent such fraud? Or are you arguing for pure capitalism in an ideal setting without such fraud?
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    Sep 08, 2008 2:07 PM GMT
    I agree that the two organizations should not have gotten as big as they are. I agree with the "Economist" magazine on this one. The government should take them over to get them back on their feet then sell them off. But to let them fail would be a disaster that is far worse.

    Free-market capitalism has never worked in its' purest form without some form of government regulation. The stock market crash of 1929 was partially due to a lack of government regulations (eg. with margin calls) and lack of government action after it made things worse (not cutting interest rates and not running a budget deficit).

    "The Great Crash" by John Kenneth Galbraith is a very entertaining read on the Stock Market crash of October 1929. "Devil Take The Hindmost" is a very informative book on past financial bubbles such as the Great Crash of 1929, the Japanese real estate bubble of the late 1980s, and the South Sea scandal of the 1700s.
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    Sep 08, 2008 2:13 PM GMT
    I'm no economist, but Fannie and Freddie were both government-sponsored enterprises, weren't they? Wasn't it the common knowledge that the fed would step in and stabilize them in a crisis part of what allowed them to grow so powerful in the first place? Not really seeing this as indicative of the coming apocalypse.
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    Sep 08, 2008 2:25 PM GMT
    In my humble opinion, this whole mortgage mess is a good example of why pure capitalism isnt a good idea. Some oversight/regulation is necessary for the common good. Republicans however are made up of business. They dont want government oversight/regulation. It is no surprise that when Republicans controlled the government, there wasnt adequate supervision of Fannie and Freddie.

    Left entirely to themselves, people/business will do what is good for them at the time. In this case, banks and mortgage companies seem to have been having a hayday selling mortgages that in the long run were bound to fail. As I have posted before, I strongly suspect that a whole bunch of people made their money up front and are now out of the picture when the collapse is imminent. Therefore, they didnt care if they were selling a scheme that wouldnt work in the long run.

    This whole fiasco is worse than the Trickle-Down economics from the Republicans and Reagan....who couldnt see thru that one....let the top have all the money and it will trickle down to everyone else to the benefit of all. Hmmmmm...let me have all the money and I will let it trickle to everyone else.
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    Sep 08, 2008 3:16 PM GMT
    hobronto saidI'm no economist, but Fannie and Freddie were both government-sponsored enterprises, weren't they? Wasn't it the common knowledge that the fed would step in and stabilize them in a crisis part of what allowed them to grow so powerful in the first place? Not really seeing this as indicative of the coming apocalypse.


    They are, but they are also listed on the stock market, and have very well-paid executives. That is the trouble with these two organizations, there was an implicit belief that the taxpayers would bail them out so they took on more risk then they should have. If you are on the stock market, and your CEOs are being generously compensated, then you should be treated like any other private-sector company. If you screw up then the stockholders lose their shirts and the CEOs lose their jobs.
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    Sep 08, 2008 3:22 PM GMT
    Caslon6000 saidIn my humble opinion, this whole mortgage mess is a good example of why pure capitalism isnt a good idea. Some oversight/regulation is necessary for the common good. Republicans however are made up of business. They dont want government oversight/regulation. It is no surprise that when Republicans controlled the government, there wasnt adequate supervision of Fannie and Freddie.

    Left entirely to themselves, people/business will do what is good for them at the time. In this case, banks and mortgage companies seem to have been having a hayday selling mortgages that in the long run were bound to fail. As I have posted before, I strongly suspect that a whole bunch of people made their money up front and are now out of the picture when the collapse is imminent. Therefore, they didnt care if they were selling a scheme that wouldnt work in the long run.

    This whole fiasco is worse than the Trickle-Down economics from the Republicans and Reagan....who couldnt see thru that one....let the top have all the money and it will trickle down to everyone else to the benefit of all. Hmmmmm...let me have all the money and I will let it trickle to everyone else.


    Well I can't disagree with your points Caslon. Another thing that this sub-prime mortgage meltdown has shown is that many people poorly understand finance and don't ask the right questions when they are talking to their mortgage broker or banker. Supposedly this mess is not over, there are a whole slew of variable rate mortgages coming due next year that will result in huge increases in monthly payments (60-80% increases).
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    Sep 08, 2008 3:33 PM GMT
    SurrealLife saidWell I can't disagree with your points Caslon. Another thing that this sub-prime mortgage meltdown has shown is that many people poorly understand finance and don't ask the right questions when they are talking to their mortgage broker or banker.

    People could have asked all the questions they wanted to. Mortgage brokers were pushing those mortgages. My mother, owner of 20+ properties, had to reject those offers based on her previous knowledge that it didnt make sense. However, to the first time homeowner, dangling the prospect of owning a home would probably be too tempting...and then the mortgage broker is sitting there saying everything is hunky-dory...it is no surprise that people took them.

    Supposedly this mess is not over, there are a whole slew of variable rate mortgages coming due next year that will result in huge increases in monthly payments (60-80% increases).
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    Sep 08, 2008 4:36 PM GMT
    conativejj said
    And as to over-simplification, well, I realize I'm talking to Americans, so gotta keep things simple.

    Aren't you the one who posted that you've never yet been outside the U.S.?
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    Sep 08, 2008 5:06 PM GMT
    I read that this is mainly a signal to foreign investors (China and Saudi Arabia) who are experiencing serious concerns about the U.S. ability to pay off the debt. Those governments have increased their purchase of these securities since 2003 (mainly because they are more-or-less as safe as Treasuries) and now they have "concerns."
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    Sep 08, 2008 5:17 PM GMT
    conativejj saidI'm so glad I live in a nation where the definition of free-market capitalism means allowing an organization/industry to get so large that to allow it to fail would decimate our economy, thus we are forced to bail it out with tax payer dollars.

    Even though the government took them over, there is still a chance that Mae/Mac's actions and stupid choices will still decimate our economy.

    If we really practiced true free market capitalism, these entities would never have gotten as large as they did. Competition would have kept them small and agile. Unfortunately, our Corporatist system has a government that bestows favor on certain organizations and penalizes others, rather than allowing the market to function on its own.

    If the government had stayed out of the market from the get go, we never would have had the robber barons of the late 1800s, the stock market crash or Great Depression, never would have had the Airlines get so large that we can't afford to have them fail. Same with the banking industry.

    Long story short, expect more government bailouts in the near future... We're F***'ed!


    Um, if the government were monitoring this from its inception, we never would've had a collapse. Furthermore, debacles like Enron would've been prevented too. True, Socialist societies usually stymie innovation and competition but they also distribute resources more equally, albeit in a usually corrupt way (damn autocrats).
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    Sep 08, 2008 6:25 PM GMT
    MunchingZombie saidWhat should government do then? Regulate the market to prevent such fraud? Or are you arguing for pure capitalism in an ideal setting without such fraud?


    Well, as I previously posted twice before, YES, the government should regulate against force or fraud. Most free-marketers who aren't out to exploit the masses support that limit to government involvement.
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    Sep 08, 2008 6:27 PM GMT
    Caslon6000 saidIn my humble opinion, this whole mortgage mess is a good example of why pure capitalism isnt a good idea. Some oversight/regulation is necessary for the common good. Republicans however are made up of business. They dont want government oversight/regulation. It is no surprise that when Republicans controlled the government, there wasnt adequate supervision of Fannie and Freddie.

    Left entirely to themselves, people/business will do what is good for them at the time. In this case, banks and mortgage companies seem to have been having a hayday selling mortgages that in the long run were bound to fail. As I have posted before, I strongly suspect that a whole bunch of people made their money up front and are now out of the picture when the collapse is imminent. Therefore, they didnt care if they were selling a scheme that wouldnt work in the long run.

    This whole fiasco is worse than the Trickle-Down economics from the Republicans and Reagan....who couldnt see thru that one....let the top have all the money and it will trickle down to everyone else to the benefit of all. Hmmmmm...let me have all the money and I will let it trickle to everyone else.


    But we never had pure capitalism. We always had the government stepping in to support one industry or another, favoring one company over its competitors. THAT is not true capitalism.
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    Sep 08, 2008 6:29 PM GMT
    Global_Citizen said
    conativejj said
    And as to over-simplification, well, I realize I'm talking to Americans, so gotta keep things simple.

    Aren't you the one who posted that you've never yet been outside the U.S.?


    And your point? Doesn't mean I don't read foreign papers or magazines or websites.

    As a matter of fact, my pot smoking ex roommate used to travel Europe and S America extensively. But when I asked him about the countries he visited, he didn't really know a damn thing about their history, current events, or their cultures.

    But he left the country more than I have...

    So travel doesn't automatically equal knowledge of the places you visit.
  • auryn

    Posts: 2061

    Sep 08, 2008 6:29 PM GMT
    Caribou Barbie weighed in on this topic and got ripped apart by economists. But what do economists know? Afterall, this election won't be about the issues, right?

    http://www.huffingtonpost.com/2008/09/08/palin-makes-her-first-gaf_n_124792.html
  • CuriousJockAZ

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    Sep 08, 2008 6:32 PM GMT
    This takeover may actually help the housing market. Wall Street seems to like it. Anything to help people get loans and buy a home -- one that they can afford, NOT one beyond their means.
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    Sep 08, 2008 6:36 PM GMT
    CuriousJockAZ saidThis takeover may actually help the housing market. Wall Street seems to like it. Anything to help people get loans and buy a home -- one that they can afford, NOT one beyond their means.


    Since you're the republican on this thread, why do you support this government bailout? Should other industries be bailed out? What makes this different than socialism or nationalizing industries? Granted we're not there yet, but this seems to me to be one step in that direction.