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United States House of Representatives
Statement on HR 1424
October 3, 2008
Madame Speaker, only in Washington could a bill demonstrably worse than its predecessor be brought back for another vote and actually expect to gain votes. That this bailout was initially defeated was a welcome surprise, but the power-brokers in Washington and on Wall Street could not allow that defeat to be permanent. It was most unfortunate that this monstrosity of a bill, loaded up with even more pork, was able to pass.
The Federal Reserve has already injected hundreds of billions of dollars into US and world credit markets. The adjusted monetary base is up sharply, bank reserves have exploded, and the national debt is up almost half a trillion dollars over the past two weeks. Yet, we are still told that after all this intervention, all this inflation, that we still need an additional $700 billion bailout, otherwise the credit markets will seize and the economy will collapse. This is the same excuse that preceded previous bailouts, and undoubtedly we will hear it again in the future after this bailout fails.
One of the most dangerous effects of this bailout is the incredibly elevated risk of moral hazard in the future. The worst performing financial services firms, even those who have been taken over by the government or have filed for bankruptcy, will find all of their poor decision-making rewarded. What incentive do Wall Street firms or any other large concerns have to make sound financial decisions, now that they see the federal government bailing out private companies to the tune of trillions of dollars? As Congress did with the legislation authorizing the Fannie and Freddie bailout, it proposes a solution that exacerbates and encourages the problematic behavior that led to this crisis in the first place.
With deposit insurance increasing to $250,000 and banks able to set their reserves to zero, we will undoubtedly see future increases in unsound lending. No one in our society seems to understand that wealth is not created by government fiat, is not created by banks, and is not created through the manipulation of interest rates and provision of easy credit. A debt-based society cannot prosper and is doomed to fail, as debts must either be defaulted on or repaid, neither resolution of which presents this country with a pleasant view of the future. True wealth can only come about through savings, the deferral of present consumption in order to provide for a higher level of future consumption. Instead, our government through its own behavior and through its policies encourages us to live beyond our means, reducing existing capital and mortgaging our future to pay for present consumption.
The money for this bailout does not just materialize out of thin air. The entire burden will be borne by the taxpayers, not now, because that is politically unacceptable, but in the future. This bailout will be paid for through the issuance of debt which we can only hope will be purchased by foreign creditors. The interest payments on that debt, which already take up a sizeable portion of federal expenditures, will rise, and our children and grandchildren will be burdened with increased taxes in order to pay that increased debt.
As usual, Congress has show itself to be reactive rather than proactive. For years, many people have been warning about the housing bubble and the inevitable bust. Congress ignored the impending storm, and responded to this crisis with a poorly thought-out piece of legislation that will only further harm the economy. We ought to be ashamed.
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I agree with this and think banks need to tighten up lending to only qualified borrowers or will be in this same mess again 5 years from now:
Quote:
With deposit insurance increasing to $250,000 and banks able to set their reserves to zero, we will undoubtedly see future increases in unsound lending. No one in our society seems to understand that wealth is not created by government fiat, is not created by banks, and is not created through the manipulation of interest rates and provision of easy credit. A debt-based society cannot prosper and is doomed to fail, as debts must either be defaulted on or repaid, neither resolution of which presents this country with a pleasant view of the future.
__________________ Give a person a fish and you feed them for a day; teach that person to use the Internet and they won't bother you for weeks.
I agree with this and think banks need to tighten up lending to only qualified borrowers or will be in this same mess again 5 years from now:
I too agree, but it's far more lucrative to take risky gambles that pay big and then when those gambles sink, the government bails you out of your bad debts. They have absolutely no incentive to learn a lesson here, except to continue doing the same thing. They've reaped the rewards during the boom and now that those investments are bad, they're still coming out ahead.
We learn from our mistakes, because often they're painful and there are consequences to them. The only thing we've taught the banks is that they have no consequences. We will see more of the same in the future.
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People of Mars, you say we are brutes and savages. But let me tell you one thing: if I could get loose from this cage you have me in, I would tear you guys a new Martian ***hole. You say we are violent and barbaric, but has any one of you come up to my cage and extended his hand? Because, if he did, I would jerk it off and eat it right in front of him. “Mmm, that’s good Martian,” I would say. - Jack Handey
The measure of one's individual liberty is proportionate to their acceptance of personal responsibility. Without the latter the former will cease to exist.
I too agree, but it's far more lucrative to take risky gambles that pay big and then when those gambles sink, the government bails you out of your bad debts. They have absolutely no incentive to learn a lesson here, except to continue doing the same thing. They've reaped the rewards during the boom and now that those investments are bad, they're still coming out ahead.
We learn from our mistakes, because often they're painful and there are consequences to them. The only thing we've taught the banks is that they have no consequences. We will see more of the same in the future.
Oh I agree that the banks need to be held accountable. They need to learn a lesson. As do the people who borrowed money they couldn't afford to pay back.
I just feel that if we didn't bail them out that this would snow ball and it would be much much much worse than bailing them out. We would all feel the pain for their greed.
To me the big problem is how we got here in the first place and correcting that.
__________________ Give a person a fish and you feed them for a day; teach that person to use the Internet and they won't bother you for weeks.
He's really good at pointing out others mistakes but this guy doesn't seem to have a lot of answers?
I saw him give and interview 2 nights ago on CNN and the interviewer asked him 3 times, "What would you do to solve this problem?" Paul never did answer the question. All he did is go on and on about what got us here and what is going to happen as a result whether we passed the bailout or not.
Oh I agree that the banks need to be held accountable. They need to learn a lesson. As do the people who borrowed money they couldn't afford to pay back.
I just feel that if we didn't bail them out that this would snow ball and it would be much much much worse than bailing them out. We would all feel the pain for their greed.
To me the big problem is how we got here in the first place and correcting that.
Unfortunately, I think we're going to have to feel some pain in order to make the changes necessary to prevent this from happening again. As it is, the pain is going to come one way or another. I just think it would have been more like getting clubbed over the head once, right now, rather than slowly being drawn and quartered over the next decade.
__________________
People of Mars, you say we are brutes and savages. But let me tell you one thing: if I could get loose from this cage you have me in, I would tear you guys a new Martian ***hole. You say we are violent and barbaric, but has any one of you come up to my cage and extended his hand? Because, if he did, I would jerk it off and eat it right in front of him. “Mmm, that’s good Martian,” I would say. - Jack Handey
The measure of one's individual liberty is proportionate to their acceptance of personal responsibility. Without the latter the former will cease to exist.
He's really good at pointing out others mistakes but this guy doesn't seem to have a lot of answers?
I saw him give and interview 2 nights ago on CNN and the interviewer asked him 3 times, "What would you do to solve this problem?" Paul never did answer the question. All he did is go on and on about what got us here and what is going to happen as a result whether we passed the bailout or not.
Leadership is about SOLUTIONS not blame.
I respectfully disagree. It's been pointed out here, several times, what his solutions are. However, abolishing the IRS, Fed and several Departments isn't very popular. You take out all of those things and stop expanding our empire then our deficit starts to go away. Let the free market correct itself, which will hurt momentarily and we then move forward with our economy.
We can talk about bialouts and regulations until we're blue in the face, but those aren't solutions. All of those are more of the same thing that lead us to where we are.
__________________
People of Mars, you say we are brutes and savages. But let me tell you one thing: if I could get loose from this cage you have me in, I would tear you guys a new Martian ***hole. You say we are violent and barbaric, but has any one of you come up to my cage and extended his hand? Because, if he did, I would jerk it off and eat it right in front of him. “Mmm, that’s good Martian,” I would say. - Jack Handey
The measure of one's individual liberty is proportionate to their acceptance of personal responsibility. Without the latter the former will cease to exist.
Oh I agree that the banks need to be held accountable. They need to learn a lesson. As do the people who borrowed money they couldn't afford to pay back.
I just feel that if we didn't bail them out that this would snow ball and it would be much much much worse than bailing them out. We would all feel the pain for their greed.
To me the big problem is how we got here in the first place and correcting that.
I'm curious based on your comments here and elsewhere... What exactly do you believe is the the cause and what "got us here in the first place"?
He's really good at pointing out others mistakes but this guy doesn't seem to have a lot of answers?
I saw him give and interview 2 nights ago on CNN and the interviewer asked him 3 times, "What would you do to solve this problem?" Paul never did answer the question. All he did is go on and on about what got us here and what is going to happen as a result whether we passed the bailout or not.
Leadership is about SOLUTIONS not blame.
Ron Paul repeatedly gives solutions! They may not sound like solutions since alot of them are basically get the damn Govt out of the Market!
He's really good at pointing out others mistakes but this guy doesn't seem to have a lot of answers?
I saw him give and interview 2 nights ago on CNN and the interviewer asked him 3 times, "What would you do to solve this problem?" Paul never did answer the question. All he did is go on and on about what got us here and what is going to happen as a result whether we passed the bailout or not.
Leadership is about SOLUTIONS not blame.
He has been saying this would come for years and years.
His solutions are clear, and he's been talking about them for years and years.
Slash government, abolish the fed, allow competing currency/return to a gold standard, no personal income tax, quit policing the world, take care of domestic issues. Stop manipulating the market, etc.
Basically, return to a sound constitutional form of government.
And yes, that does fix the problems.
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Mr. Garrison: Kenny, would you please climb that ladder and take down the star above the stage?
He has been saying this would come for years and years.
His solutions are clear, and he's been talking about them for years and years.
Slash government, abolish the fed, allow competing currency/return to a gold standard, no personal income tax, quit policing the world, take care of domestic issues. Stop manipulating the market, etc.
Basically, return to a sound constitutional form of government.
And yes, that does fix the problems.
And I respectfully disagree. Think money is tight now? Abolish the Fed and return to the Gold Standard, we will have home ownership rate of 50% or less.
What Government are you willing to give up? Are you willing to let breadlines form again? Willing to go to bed at night knowing that there are sick and dying elderly Americans that can't get healthcare? Willing to sell the Grand Canyon to the highest bidder?
Tell me what you would cut, why, and what effect you think it would have on the country.
Abolishing the IRS does nothing. It is an agency. The Government, no matter how limited, still needs revenue, and a revenue enforcement agency. You can change the name, but the functions are still the same.
We had our biggest economic growth with an income tax. Seems to work just fine. Can it be streamlined? Yup. Would a flat tax with zero deductions be better. You bet.
And I respectfully disagree. Think money is tight now? Abolish the Fed and return to the Gold Standard, we will have home ownership rate of 50% or less.
I am not sure I'm for going back to the Gold Standard, but - what is worse: 50% home ownership rates, of higher rates that include millions who should never have bought a home to begin with due to affordability issues?
I am not sure I'm for going back to the Gold Standard, but - what is worse: 50% home ownership rates, of higher rates that include millions who should never have bought a home to begin with due to affordability issues?
I am not saying everyone should own a home. And I know everyone doesn't need a 2500 sq ft home. What is wrong with higher homeowner ship of AFFORDABLE homes. Yeah, that doesn't make the brokers, the builders, the banks, etc as much money as McMansions do, but then you don't have this bust.
I am not saying everyone should own a home. And I know everyone doesn't need a 2500 sq ft home. What is wrong with higher homeowner ship of AFFORDABLE homes. Yeah, that doesn't make the brokers, the builders, the banks, etc as much money as McMansions do, but then you don't have this bust.
Jon, you have this "bust" whenever values and money are artifically messed with! Like, introducing a $700 billion bailout package... Or, like instructing Fannie and Freddie to lower lending standards to get more minorities and lower income people into homes!
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