Economic Musing

Have you heard that the government is thinking about phasing out Freddie Mac and Fannie Mae?  The sentiment is that things got out of control with all the subprime lending, and these agencies ended up focusing on the greed of the few and screwed the many.

Stuff like this gives me a lot of cognitive dissonance.  I'm such a proponent for social services as a safety net for citizens (Medicare, Social Security, unemployment insurance, temporary food/energy assistance to the poor), but at the same time I think government should know its place and not be so freaking involved in the money supply, interest rates, and trying to mitigate (and/or create) the screwy stuff that happened in the past few years - which ends up screwing things up even more for the long-term. 

Way back when I met my husband, he gave me some speech about being a fiscal conservative who supported social programs, or something like that.  He can probably remember his speech better than I can.  His whole long speech amounted to that he's a moderate Democrat.  The longer I think about this stuff, the more I realize that he's right about the whole fiscal conservative with support for social programs.  Ultimately, the government has really screwed shidizzle up.  As much as I want to blame the father/son duo, the roots of it all go back further than that.  HW did screw it up a whole lot on his own, in conjunction with his advisors. I still stand by that, but I'm not saying we can completely put the nation's economic ills just on his shoulders.

I think what really nailed the coffin in it for me is when they lowered the Social Security tax this year by 2% of income.  So you give a tax cut (hence, less revenue) for a sorely underfunded program that is a safety net to so many elderly and disabled citizens?  In what world does that make sense?  I know all the dollars are green in the aggregate, but it's an awful message to send. 

Back to the whole Freddie Mac and Fannie Mae phase out, what in the heck is going to happen to lending?  Banks are already uptight as heck, and interest rates are going to soar once they are the only ones in town.  Not that I necessarily think that's a bad thing (because I do think the government has interfered too much), but until things are at a new equilibrium, house prices are going to dive, dive, dive.

Need to look at www.lendingclub.com more...or start the Bank of Beth. I was so intrigued by Lending Club.  What the heck, private people can lend money to other people at rates that aren't as high as credit card companies/banks.  I'm kind of interested in it in a purely nosy way.  If you invest money as an individual lender, with this service you can pick and choose which loans to fund based on many, many criteria of your personal choosing.  In addition, the website gives each of the borrowers a rating, which corresponds to the risk/return associated with that person.  I can give $ to Chuck in Dallas who is wanting to buy a car or Sandy in Florida who wants to open up a business.  Absolutely weird!  I'm still trying to wrap my head around this.  Of course I've been trying to really understand how all this works, but there's only so much you can learn without signing up first.  And I'm certainly not transferring money to this endeavor without understanding infinitely more than I do now.  Still, it's definitely an interesting concept.