Wednesday, September 24, 2008

How would you feel if someone called you subprime?

I don't know much about economics. These are my thoughts briefly:

Lately I have been seeing the merit in letting the free market run its course with the current economic crisis rather than bailing out the banks who made unwise lending decisions.

I find myself fortunate in that I feel that of all demographic groups in the US, I feel very minimally impacted by the current economic situation.

I think the debate should go on this Friday.

Everyone alive should listen to This American Life's episode on the current crisis. It is gripping, and that is saying a lot for a story on economics. It is an hour, but completely worth it. Check out The Giant Pool of Money.

And that's it.

7 comments:

cindy said...

sometimes I wonder how people in Sub Saharan Africa feel about being called Sub Saharan.

I like This American Life. There's a good one I listened to for my multicultural America class a few weeks ago about a guy with PTSD after he got back from Iraq.

I See Badgers said...

Hey, I just listened to that with my wife last night! crazy.

SAN MIGUEL said...

How would a sandwich feel if someone called him a sub-sandwich?

Ryan said...
This comment has been removed by the author.
Ryan said...

Gabe, digging a little deeper into this might reveal a surprising cause of the problem. "Lately I have been seeing the merit in letting the free market run its course with the current economic crisis rather than bailing out the banks who made unwise lending decisions." Take a look at this NY Times article from 1999.

http://query.nytimes.com/gst/fullpage.html?res=9c0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=all

Be sure to pay special attention to paragraph three.

Gabe said...

While I've heard that financial institutions have faced pressures in the past to extend lending into underserved areas (I heard one of the chief lobbyists for the financial industry say this), but I have yet to hear that this push is due to a single party or administration. I'd be curious to know if that is true. Still, such pressure, regardless of its source, does not relieve institutions from responsibility when other financial institutions who made wiser decisions are still very solvent.

Ryan said...

These institutions aren't like other banks. They are a part of the government established to avoid "market failure". This is exactly why government intervention in the marketplace doesn't work. If they had never existed, their client banks wouldn't ever have taken on such risky investments, or if they had they would have suffered the consequences and gone out of business. The problem arises when you tie all of the risk back to a government run oligopoly.