Both options are not great, but one leads to more problems. We have a situation here where these banks and investment houses have thrived and advocated for a free market. And now that the free market is telling them to go screw themselves, they cry for government help. It doesn't work like that.

Even worse, bailing out businesses that fail causes more problems down they road. To name one, it gives no incentive to correct or fix the problem. To name another, smaller more innovative organizations (read: less corrupt and more responsible) are not given the chance to fill in the gaps, instead they are obstructed by government intervention.

The free market actually caused this problem, you know, because there weren't enough government regulations on unscrupulous lending practices.

Just wait until china slows down. You cant continue to produce when no one is buying.

He did say a McCain plan would be even worse.

OT: A lot of foreign markets are tied into the U.S. home buying market. It was easy money for them. Why? They could fund the banks and survive if foreclosures hit. The banks would resell the property and still make loot. However, the foreclosures are too many and it's killer surplus out there. Homes aren't selling. So, banks are left holding the bag and can't get money off them. Now, the foreign markets are taking a hit. It can only get worse.

Your forgetting that not bailing certain ones leads to more trouble than not bailing them out. Lets face it, Bear Stearns, even being bailed out, is not in the mood of "oh well, i got bailed out so i win" mood. No, they still lost alot of money and credibility. Second, this whole mess itself is incentive to fix the problem. The problem was rampet use of bad ARMs which led to forclosures.

You say not bailing out anyone will make it worse in the end, but not bailing out Bear Stearns could have truly led to a financial collapse much larger than this, especially since the market was not prepared to loose a player like it (which now, even with these closing, it can handle it better). Second, how are smaller , more innovative organizations gonan be given the chance to fill gaps? There is uncertainty, people are not gonna trust a small start up in the markets being shaken up. Smaller organizations cannot do as well in these areas. And, small bussinesses in other fields are gonna feel the hurt too since it will be harder to get loans in all areas. And who do you think gets denied for loans first ;)

Fact is, if the govt did not intervene at all, we would be in a big big big mess instead of just a big one :P Remember, its the govt not acting that led to the magnitude of the great depression.

Lastly, madskillz is right, its not just us feeling the hurt, its asia and europe. Even if they have more investments than just the housing markets (they do) those investments are going to be hurt by market uncertainty, which makes the foriegn companies lose stock value in thier own trading markets.

who gave the banks the power to do this?

Greenspan.

I wouldn't trust anything he says right now.  I didn't trust him when he was in charge either.

He would say anything to make himself look better.

I remember him on the cover of TIME magazine - he was named the most powerful man in America.

That was the problem - he was too powerful and enjoyed it so much that he made some terrible decisions.

Interesting article

http://news.yahoo.com/s/ap/20080916/ap_on_el_pr/candidates_economy

McCain blames the greed and corruption (I agree) but Obama blames the White House (not really).
And last time I checked, democrats controls the congress. What have they done? Anything?
What is their approval rating? in single digits last time I checked. What the hell are they doing?

who sounds more like a candidate that will face the problem and do his best to fix it?
I think the person who will punish the greed and corruption, and not someone who just blames another.

"With chaos rocking financial markets, John McCain assailed "greed and corruption" on Wall Street and promised to clean it up, while Barack Obama blamed White House policies and said his opponent would only deliver more of the same."

I'm not fooled

I hope the government bails me out too, when I can't pay my student loans.

It is both the White House and "the greed and corruption" of Wall Street.  Maybe Congress could do more if the Republicans weren't blocking as many of the Democratic initiatives as they possibly could because they are better at politicking than making policy.

And why do you have to turn everything into a political debate?  This is more of an economics debate than a political debate.  You have contributed nothing to this thread.

Correct me if I am wrong, but aren't most Libertarians/Conservatives on the side of the Federal Reserve? I mean nobody's perfect, but I think the Fed does a way better job than Congress of maintaining the economy minus this recent loan fiasco. Congress needs to step up on the regulatory side of things though.

The Fed has been too focused on helping the economy rather than fighting inflation recently for their own good, but the Fed at its core is still pretty good.