Update
March 16th, 2009
And the beat(ings) go on…
As I write this the Secretary of the Treasury is on TV telling America that what we need to get out of the mess created by government encouraging banks to make bad loans to homeowners, is for banks to make bad loans to small businesses. The phrase I need to define here is “bad loans”. What started the housing crisis was the government taking action to encourage, or in the case of Fanny Mae and Freddy Mac, require, banks to make loans to people with inferior credit. This lead to the debacle we face today. Now the banks are being given a mandate by the Obama administration to make loans easier to get by small business. What Secretary Geitner is saying is: make loans you would not otherwise make, that is make loans to small businesses that you are not now making now because of the bad prospects of the loan being paid back. And the government will do everything it can, print money or take it from the taxpayers, to make sure banks have the funds to do this.
The government has now said that it would guarantee these loans to small business just it guaranteed the loans made by Fanny Freddy. So banks will now make bad loans, knowing they will be paid back by the government if the business fails.(It all looks like a con game to me. How can we manipulate the system and public opinion so our friends and us can get more money?)
Please let us watch closely as this plays out in the economy. This will be revealed over a period of years, so don’t forget what was done today. If I am wrong and this does save the economy I will apologize profusely.
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