Politicians are Going to Bankrupt the U.S. If They Don´t Approve this Bailout Bill!

The House of Representatives is scheduled to vote on the $700 Billion "Bailout Bill" this Friday and I keep hearing rumblings in the media from politicians saying that their constituents are voicing their concerns over this proposal, citing corporate greed and the view that this is a misappropriation of taxpayer funds.

So, as you might understand from reading my views below, this negative behavior and resistance is terribly confusing. After all, isn´t the government proposing to "purchase" troubled loans from financially distressed banks at below market prices in order to provide institutions with capital and liquidity which may allow them to continue stay in business so that they can continue to provide credit and capital to U.S. consumers, which in turn allows the economy to move forward and grow?

Furthermore, won´t this capital provide pricing stability to housing and implement a "floor" in housing, which is at the center of this crisis?

Finally, won´t these publicly traded financial institutions be able to move forward with confidence and in the process stabilizing the stock market by providing analysts with more transparency and the ability to forecast and evaluate future earnings and performance of banks and financial institutions once their balance sheets and troubled assets are cleansed off the books?

The biggest concern to me in this whole mess is that the politicians and the public may not be considering the hard facts. If these banks are left to fail, not only would consumers be unable to buy a house, car or merchandise through a credit card causing a complete "seizure" in our economy as well as the global economy, but many of these institution´s preferred stock, bonds and common stock are held in the retirement and pension funds of nearly every American who has any money invested in a retirement plan or company 401k.

It is a well known fact that nearly every major retirement plan, whether run by the state, federal government or the private sector is heavily invested in the bonds, preferred stock and common stock of many of these troubled financial institutions. Every fireman, policeman, school teacher, government employee, company employee and corporate executive and any other investor whom holds mutual funds, bonds or stocks will all lose a huge percentage of their retirement savings if the stock market doesn´t hold value.

If you take a look at today´s eroding capital markets and the seizure of available credit to U.S. consumers from home loans to auto loans, you will see that if this bill does not pass, the American way of life will literally be over. I don´t mean to frighten anyone, as I believe in my heart that this bill is going to pass this week, however, these politicians scare me. It seems that, although many of them are truly in their position to better and further the American dream, many politicians are only in it for the "power" and they will do whatever they can to get re-elected.

When our founding fathers created our form of government, politicians were elected from the local town Mayor to the President of the United States based on their ability to "lead", not just because they were "popular". Leaders need to make tough decisions, many of which may not be understood or very popular at the time. But, if decisions are made with integrity and for the benefit of their constituency, these leaders will gain votes come election year, not lose them.

Today´s politician is so concerned with getting re-elected in our current era based on the idea they have to be "politically correct", many have become obstacles in the legislative process by attempting to please their voters instead of doing the right thing. The average American doesn´t even understand these complex markets and how things really work, they merely apply for credit cards and home loans, get an approval and then spend away, hoping they keep their jobs long enough to pay their bills off before retirement. The reality is that general public doesn't have the knowledge or capacity to make these judgment calls, as they are far too complex and too important.

So, you´ll understand when I tell you how frustrating it has been to hear so many of the media pundits and politicians talking about how they´ve "had calls come flooding in opposing the bill" by these politician´s constituents. Well, I say, "Too Bad!"

If I was one of these politicians faced with this tough decision, I´d give my constituents the following speech, short and sweet:

"My Fellow Americans and Dear Neighbors, we are currently faced with a tough decision. The proposed $700 Billion Bailout Bill has been put in front of the House of

Representatives for a vote. As your elected representative and leader, I must do what is right and not what is popular. Although I have clearly and loudly heard your call to vote against this plan, I must gauge my actions according to facts, figures and harsh reality. The fact is, this bill must pass or we all may suffer dire economic, social and personal consequences. More to the point, I fear that saving the American way of life is much more important than getting myself re-elected, therefore I am respectfully advising you that I will be voting "Yes" on this bill, even if you may not currently agree with this decision. I hope that in the end you will see that this is best for the country and it´s what´s best for you. The American way of life is in Crisis, not just these financial institutions. Please support your country in this time of need, we need your voice to ring true of compassion, love and support for your fellow man. If you aren´t financially struggling right now like many Americans are, please understand that many of your neighbors and maybe even family members desperately need your support. Please, I urge you all to come together for the common good and we will all get through this safely and with prosperity in the end."

It seems to me that to most educated observers, the recent stock market volatility, slow sales figures from auto makers to shop clerks across America and the seizure of available credit across the board should be proof enough that this financial crisis extends well beyond Wall Street.

The American people have seemed to lost the history lesson learned in grade school, where we were taught that in the 1800´s to the early 1900´s, America was an "industrial" nation, producing steel, agricultural products, oil, autos and more. Over the past 100 years, however, due to the tremendous wealth created from the Industrial Revolution and due to our free society, enabling all citizens an opportunity to own land and create wealth, our culture shifted from making goods to buying them. A lesson that will soon be in future history books is that you can´t be a consumer driven economy without liquidity, credit and capital stability. We can´t survive this financial crisis if assistance isn´t provided immediately, hopefully you will call your politician of choice to let your voice be heard on this!

In my view, the root of the problem was the aggressive and risky borrowing of money to buy overpriced properties and consumer goods by the consumers, not the banks. The banks just satisfied the demand by providing capital at fair market interest rates. Sure, many subprime lenders and aggressive Alt-A lenders eased their credit standards to make the process easier for the average American to buy a home, and in some cases, took advantage of borrowers, but that has clearly been an exception, not the rule here.

It is true that the government lowered interest rates after the stock market crash in order to promote home ownership and, in the late 90´s, Fannie Mae and most other lenders created programs to ease credit standards in order to open up the demographic of whom could afford a home. However, although this sparked the housing boom, isn´t it up to the buyer/borrower to determine his/her ability to repay a loan when taking out debt? Isn´t it up to the borrower to honestly claim their "actual" income on a loan application?

To make my point, if you were looking at buying a boat and saw one for $50,000 that you knew you could afford on your salary with standard financing , but when shopping you saw a yacht selling for $2,000,000 just next to it, would you buy the yacht just because the salesman said he could get you cheap financing? Maybe one or two of you answered yes, but my guess is the majority of readers gave a resounding NO! That would be absurd, right? You would know that you couldn´t justify the purchase of a $2,000,000 yacht on your salary! Well to me, this is no more absurd than a home buyer borrowing $800,000 to buy a home when they make $60,000 per year just because "they could". Well, that´s exactly what happened, and to be clear, that´s what´s really at the root of what brought this financial crisis upon America.

Due to creative loans such as Pay Option ARMs with low teaser rates and lax credit standards, the demand for new homes was incredible, creating prices to rise dramatically. Instead of a homebuyer stopping to evaluate the actual ability to repay the loan, they only looked at the short term rate and affordability, assuming the home would appreciate and they could refinance the home later if the ARM adjusted too high. Well, as we now know, what goes up must come down!

At some point, it seems to me the American consumer needs to look in the mirror and stop blaming others for their risky behavior. Since most homeowners are voters too, it seems to me they should be calling their politicians begging them to pass this bill since it this bailout plan may very well help them save their very own house one day! As far as the politicians go, they should be taken out to an open field and shot if they don´t pass this on; I´m sure their voters won´t even miss them.