I like the philosophy of some of you. You realize that if the government did nothing to help banks (similar to how they ignored it at the beginning of the Great Depression) the mass of banks would have collapsed (just like they did at the beginning of the GD).

That collapse would have caused a much higher number of businesses, including the big automakers, to also collapse and *maybe* some would have just shrunk in size but most would have gone the way of Circuit City. (just like what happened ..... GD)

These thousands of businesses lost would equal millions of jobs lost (GD) which would have also multiplied the effect of people losing homes (GD) which would also cause more banks to fail (GD) and so on.

This was the snowballing effect Bush and then Obama was trying to curtail with the bailouts etc. Because, regardless of political position they both had enough financial advisors who recognized that doing nothing would just bring a new GD with far worse an outcome than the GD.

Instead this time they rescued the banks in order to ensure money was still flowing through the system. Then they decided it was better to assist certain markets (auto) because of the vast number of American jobs it supported in not only GM and Chrysler, but also a much larger number of parts, accessories, paint, oil, dealerships, etc jobs. As well as obviously a hugh number of foreign jobs as well, keeping in mind that this recession affects everyone, not just Americans.

Personally, instead of giving the first $700 billion to banks, they should have bought all the bad mortgages that was the initial spark of this issue. Thousands of people could have kept their homes with far better rates and paying the real values, banks would have still been saved as all that bad debt would have been paid for, and the government could have spent far less money than $700 billion.

Also, these bailouts weren't free. The companies taking them are greatly hindered by regulation tied to the money and NO bank is taking the same types of bad loans they were.

Finally, if you know anything about a recession the main reason one stays around is citizen confidence in the economy. As confidence goes up, people invest and spend money which gets the economy moving as money begins to flow through to every market and growth begins again.

Not doing anything would have been a far worse action. Regulation is intended to spur the market and prevent monopolization like socialism and MS which is always bad for the consumer. Obama's actions are far from socialist. With the exception of Health Care, Bush, Reagan, McCain, etc would all be doing the same actions. You have to spend money to get confidence and economic growth back.

then we worked in extremely similar fields and you would have been a direct competitor

superchunk are you really suggesting the US government should buy all the troubled loans at the same time? Do you have any idea how much money that would cost? It's several trillions of troubled debt which banks created.

It's not really true that regulation prevents banks from creating further trouble. There are even reports of Morgan Stanley repackaging some of those bad loans into financial products of the highest rating (for some stupid pension fund managers to buy). Do you have any evidence of what you stated?

Regulatory capture, oligarchy and national socialist fascism. 

You really want that?

This is where we disagree. I look at it as Bush and Obama are trying to keep a bomb from going off, that has already exploded.

What the government is trying to do, is fix a problem they can’t fix. The unemployment rate is unaffected my government involvement. The GDP is unaffected by government evolvement. The stock market has been unaffected by government evolvement.

While it’s sad that all those things will happen, regardless of what you do, all those things are going to happen. The best way to reduce the negative long term effects is to hit rock bottom as fast as you can, and start recovering.

What government is doing, is just prolonging the inevitable, and the longer it takes to hit the bottom, the worse it is. Not only that, they are getting there by spending money we don’t have in a debt based recession. This means that it’s possible we will sink even lower this way then if we did nothing at all.

Oh, and the problem with the GD, was tariffs done early in an effort to price fix. All economic models agree that to get out of a recession, prices have to fall (they just disagree on if government should force them to fall).  Hover didn’t make the problem worse by doing nothing. He made the problem worse by trying to fix it in the complete opposite way then what was needed.

Oh, how history repeats itself.

This is what I was suggesting...

Sources:

Total Houses owned: http://www.census.gov/hhes/www/housing/hvs/annual08/ann08t15.xls

Est of % homes needed to buy: http://www.census.gov/hhes/www/housing/hvs/annual08/ann08t5.xls
This 3% is more than triple the less than 1% change over the last year of homes lost.

Average Price: http://www.realtor.org/wps/wcm/connect/c39d96804e10820bb8d5ffec21680fb0/REL09Q1S.pdf?MOD=AJPERES&CACHEID=c39d96804e10820bb8d5ffec21680fb0

Summary:

As you can see for less than the first bail out the Government could have actually purchased the most undisireable loans. Instead they gave the money to the banks with too little oversight that allowed the banks to determine which houses to save. This was bad as the banks only saved those that have/had the best potential returns vs those with the most need.

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@TheRealMafoo

Clearly we disagree on this. Inaction was proven to not work with the GD. They chose to not give funds to banks and raise tariffs. Both were absolutley horrible actions that resulted in massive economic worldwide failure. It wasn't until tariffs were brought down and the banks that were left were released from Gold standard and the new rules for our banking system where unlimited funds can be pumped into the banks, then the situation began to improve. Granted, by then it had snowballed so badly it took massive government spending, a war, and massive rebuilding of infrastructure to bring about the economy.

They are now trying to curtail far worse conditions and far more money spent by spending now and saving the most important markets.

Could it have been done better and with better oversight, of course. Is it still better than nothing, definitely.

How can you say the government raised tariffs, and then say inaction proved not to work? Raising tariffs is an action.

Also, in the GD, we never borrowed money we didn't have; we just taxed the hell out of the rich to pay the debt off. This is not what we are doing today. We are creating debt to try and solve a debt problem. We have spent trillions of dollars, and still the economy gets worse every day.

Are you trying to say that less than 1% of all mortgages were in any danger during this crisis?   I'd like to know where you received your number from and if it were that low how can that be considerd a crisis when the standard annual mortgage default rate is higher than 1% annually anyway.

Viper1 is right. In the first half of 2009 alone, USA foreclosures were 1.5 million:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHAbmgVoHjA4

For those who think USA's record deficit doesn't change anything:

http://www.bloomberg.com/apps/news?pid=20601101&sid=aL8XrkfDKaVY

Most lenders to USA are cutting their holdings of USA debt, the only exception being China.