Thoughtful Thursday – Bailouts and Fiscal Responsibility

Photo Courtesy of Microsoft Clip ArtWatching what’s happening in the markets, I feel like I’m on the edge of a cliff, waiting to lose my grip (and my money). I think many Americans feel the same way.

So today’s Thoughtful Thursday is about this bailout everyone is discussing and my . . . upset with it.

I know we need to do something. But I want whatever is done to not heap yet more burdens on the large majority of Americans. You know, those people who get up every day, go to work, pay their taxes and pay their mortgages on time.

How do so many Americans do that? Fiscal responsibility. A strange idea to some, I know. That means you don’t spend more than you earn and you don’t borrow more than you can pay back.

When I got my first mortgage, I knew the bank would only lend me a certain amount of money based on my salary. The bank also knew that I intended to live in my home and maintain it.

The banks that are stable seem to have stuck to that principle. Homeowners are a good risk in general and when the system works, its good for both the banks and the homeowners. Banks make their money on the interest rates and homeowners build equity in their homes.

Somewhere along the line, some banks forgot this. They started giving loans well in excess of what people could afford to pay. They reduced their standards for credit. They allowed real estate speculators to buy beyond what they could which drove up housing prices, creating a bubble.

Well, at least that’s my take from what I’ve been reading lately.

So then what happened? People couldn’t pay their mortgages. Housing prices dropped and those properties which seemed like gold turned to lead and speculators walked away from the properties without paying their mortgages. Foreclosures skyrocketed, driving down home prices for all of us who have been faithfully paying our mortgages and obviously, threatening the existence of all these mortgage companies and our economy.

Fannie Mae. Freddie Mac. Did they use unsound practices in granting mortgages? If they did, who is responsible and why are you and I footing the bill?

Should we ask the CEO of Freddie Mac? In 2007, the Chairman of Freddie Mac got nearly 19.8 million dollars in compensation. You can click here to read more about it! Of course, nearly 14.3 million of that was in stock options, so maybe now it’s not worth 14.3 million. The article goes on to say “If Syron resigns or is fired with cause, he will owe the company $1.25 million. But if he is fired without cause, he will pocket $19.1 million.”

Do you think there’s cause? Do you think that many Americans have a right to be royally pissed about this bailout?

This inquiring mind wants to know what you think.

For me, I’d like to get the economy stable, restore the market’s balance and get home values stabilized. For many of us, our home is our nest egg. But I’d also like to know that this bailout isn’t going to reward CEOs, speculators and those who are found to have improperly received mortgages. Not to mention that I’d like to make sure that regulations are put in place to prevent this from happening again.