Does the USA need a perestroika?

[mrstickball]

Final-Fan said:

Kasz216 said:

Final-Fan said:
"Had a lot of the big banks fallen... it seems a lot of small local banks would of taken their place."

But if people think the new ones would have just slid into place without massive repercussions to the economy from the destruction of the old -- and I'm not saying you do -- they're deluding themselves.

Bad things would of happened... but not that much worse if you ask me.

I mean, the biggest fear people had was that poor people wouldn't be able to get loans.  That pretty much happened anyway.  Loans almost completly dried up for average people... outside of your smaller banks, more stable chains and the usual "Cash Advance" places that makes money hand over fist.  Or at least that was the case by me.

All that bailout money, the government probably could of made it's own bank to bailout people and provide non-profit loans to people for a few years until new banks took the place of old ones if it wanted to.

Probably. 

@ mrstickball:  So your problem is with the timing, rather than the occurance, of bailouts? 

A little bit of both.

The chain of events that were bad (from my research) is:

• Government backs loans of questionable reliability to lower income Americans thanks to CRA of 1999.
• Banks continue to act predatorily, using the fed backing
• SHTF
• Government reacts by hastily infusing the banks with $800 billion of TARP funds
• Some banks go under
• Others see huge profits, continue bad business as normal

My problem is that the enabler was the US government backing bad loans. 66% of all bad loans were through government-based securities, so I do believe the government shoulders most of the responsibility for the failure, as well as rectifying the situation.....Why would the government approve of something, then back out from taking care of the very banks they forced to issue predatory/questionable loans?

So because I think that the government may have had the right to help out (since it created the problem initially), it should have at least done it in such a way as to ensure the money was used efficently. But now we see that the money, like most other government initiatives, did not go entirely to the problem, losing taxpayers billions of dollars in expenditures and interest.