Fri, Sep 05 2008
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Published July 16, 2008 06:48 pm - Bail banks out, but prevent future troubles Expediency and integrity often never share the same room.
We can see both sides to the news that the government is planning to bail out lending giants Fannie and Freddie Mae, which are both bordering on collapse. On the expediency side, we can see how the fall of two such leviathans could spell doom for an industry that is already feeling the crunch — and ultimately for the nation’s teetering economy. Bailing out the banks makes sense for the big picture. If we don’t want to see a repeat of the dominoes that fell leading up to the great depression, the government is the only entity with the muscle to hold up parts of the economy. That said, there are lots of individual investors who find themselves stuck underneath the rubble of the parts of the lending industry that have already crumbled. Some nearing or in retirement are seeing their savings’ worth shrink. With bank closures and federal bailouts, some are even seeing their investments disappear except for the federally insured portion. The lending industry was irresponsible, lending money to people who had no business borrowing it. But all the lenders saw were the dollar signs they’d be raking in on interest payments. And now with the economy slowing, not only do they not get the interest, they are reaping record loan defaults. And unfortunately, that problem trickles down to everyone, even those who weren’t irresponsible. The government is right to bail the giants out for the greater good, but greater scrutiny is needed to avoid hurting more people. 
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