Hi Lynn,
actually, a sizeable portion of my portfolio is in the finance sector, which means I own shares indirectly in many banks through my mutual funds. Right now, I'm sitting on around a 9% return for the year. I'm sure that would have been closer to 15% had there not been a credit meltdown.
However, my point is that the markets are working. Banks are re-adjusting their portfolios and writing down impaired assets. Other banks, hedge funds, and deep pocket entities are infusing money into the finance sector through impaired asset purchases, investments, and credit facilities. These all have the same beneficial effect of a bailout without the negatives that come from a gov't bailout. Gov't bailouts create the wrong incentives in the market: 1) banks don't learn their lesson on risky lending practices, 2) it distorts the impact of bad loans, effectively hiding the damage, so investors get burned from not seeing the impacts on financial statements, 3) you and I have to pay for it through increased taxes and loss of purchasing power as the dollar declines.
They don't need a gov't bailout. This country has become used to having the government always bail out sectors that have made stupid decisions and at the end of the day, everyone forgets that it isn't the government that is bailing them out, it's you and I, in the form of higher taxes, less purchasing power, and borrowing growth from the future to get growth today.
Why should your retirement dollars suffer because GM and Ford don't know how to compete effectively with Toyota? Why should you and I pay for tax breaks for the oil companies to drill offshore? Why should you and I pay for bailing out banks that make risky lending decisions?
Just remember that when they talk about gov't bailouts, it's you and I who pay for it. Your savings are immediately worth less by the pro-rata amount of the bailout divided by this country's net worth. Same thing goes for rate cuts. Your savings are immediately worth less by the pro-rata amount of the decline in the dollar caused by the rate cut, due to purchasing power loss.
Thinking about the real costs of these actions, puts a different perspective on your personal wealth, doesn't it? |
