Bailout fever strikes Washington on clarkhoward.com

RIP-OFF ALERT: We have had money stolen from us by our elected officials in Washington, D.C. This is not a normal rip-off alert, but rather something Clark is outraged over. Last week, he told you that the Federal Reserve felt sorry for Bear Stearns -- a company where the average employee earns just under $300K annually -- and orchestrated a taxpayer-funded buyout of the company. Bear Stearns doesn't deal directly with the public, nor do they qualify for FDIC insurance. But they are influential in Washington. That's why Treasury Secretary Paulson took $30 billion of our dollars and engineered the JP Morgan takeover. We taxpayers took on the risk, but JP Morgan got the benefit.

The consequences of this kind of thinking are ugly. Under the guise of moral equivalency, Sen. Clinton has issued a proposal for a $30 billion bailout of those who can't pay their mortgages. What she's arguing is that if we save the bigwig capitalists, we have to save the commoners too. In order to do so, we'd have to borrow from the American people yet again by taking money they don't have. Right now we're already on the hook for $1 trillion. We're getting ripped left and right. Is there anyone who really represents our interests?

Paulson had the arrogance to say the Bear Stearns debacle was not a bailout because it was sold at $2 a share (since revised to $10 a share). Clark is appalled that in a free market economy we're getting decisions handed to us based on who has the power and influence. Politicians are lying with straight faces saying that none of this is a taxpayer-funded bailout. On both sides of the aisle, they're burying their heads in the sand, or saying the move makes sense under the "Too Big To Fail" theory. But Clark thinks if Bear Stearns made bad bets with borrowed money they should end up with nothing.

It's not impossible that Sen. Clinton's proposal will gain some real traction in an election year. But consider this: Most Americans pay their mortgages. Why should we be taxed to help out somebody who's not paying theirs? In rare situations, some retirees have had houses stolen from them by con artist mortgage brokers. Clark can see the value in a bailout for that small segment of the population. But somebody who bought with no money down and isn't paying? Clark can't see that. But what can you expect will happen after we bailout people making $300K/year?

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What others are saying

America will fail
"Most Americans pay their mortgages. Why should we be taxed to help out somebody who's not paying theirs?"

Well said Clark. Why are the foolish being rewarded? Things like this will eventually make America collapse. Why should people that make bad decisions be rewarded? Is it such a bad thing for people to learn from their mistakes?

Maybe I will skip a couple months of mortgage payments... I could surely use more money in my emergency savings.
By Chris @ 03/27/08 08:50:32 AMreport abuse
Bailout fever
Maybe we need to circulate a popular petition stating our outrage and demanding Paulson's resignation. Maybe the alpha enablers should feel the consequences of their irresponsible behavior.
By Peggy @ 03/26/08 11:42:55 PMreport abuse
Responsibility Amnesty
Seems everyone wants amnesty from all of the responsibilities and common sense. This cannot continue! When do I get amnesty from doing the right thing?
Right On Clark!
By Jennifer @ 03/26/08 09:06:26 PMreport abuse
Bear Stearns bailout
Oh come on surely you are not that naive? Are you saying that this does not go on all the time? The politicians are not there to help us, they are there to garner political power by whatever means necessary to keep and grow their power. It is what the world is and has always been about. Sure there are a lot of good souls out there, but the souls of politicians are not among them.
By Not Naive @ 03/26/08 08:03:41 PMreport abuse
Bailouts
I agree with the atricle and the latest posting. We should be responsible for our own financial decisions. ( My wife and I bought a home by going with 1.5 times our gross income!), my previous home was 2 X my income. With the proposed bailout, we may as well all jump on this wagon and let Uncle Sugar come to the rescue. But, many of us are better people than that. We take responsibility for our debts. This rescue thing is not far from the people who know the welfare system and the single mothers that know exactly how many kids they can have and get benefits, ny more and there is nothing in it for them...disgusting
By Art @ 03/26/08 06:47:43 PMreport abuse
Bail out of Bear Stearns
Clark.

Your show is terrific. I recommend it to clients, and I advertise on it locally. As a NAPFA fee-only CFP, I almost always agree with your insight.

On the Bear Stearns bail-out you are not completely on-the-mark. While I don't like bailing out multi-millionaire investment bankers and thereby rewarding what becomes a morale hazzard, the Fed's intervention may be wise here. Here's why:
- if Bear Stears or any of the big 5 investment banks are permitted to become insolvent, it would take weeks for the capital markets and international banking system to figure out their net positions on Trillions of dollars in the credit markets ( a $45Trillion market). The banking system does not handle unknowns well. Allowing Bear Stearns to fall may well stop commercial banks from lending to each other and thereby jeopardize the entire banking system. This in turn may spark an uncontrolled run on the dollar. You don't want to see that unless you welcome a decade or more of global depression.
By jeff seymour @ 03/26/08 05:52:50 PMreport abuse
bailout special interest
It appear that we have just reason to think that our government does not give a crap about the individual citizen. We are pawns to be shuffled and used at will. I suppose, in reality, we need to teach all our children that special interests and favors are the way to go. Honest work rarely pays off as well as having friends in high places.
By Greg @ 03/26/08 05:34:16 PMreport abuse
Financial market stability
I think if the fed did not act the market would have declined to scary levels and everyone's IRA's, 529's, 401k' etc would have done the same. The financial markets have to gain some stability or things will get even worse. I don't like the out of control spending by our politicians but confidence has to be maintained. The rebate check is a waste of money and Clinton's idea like many of hers will not help. Get the credit markets flowing and the economy will get back on track.
By skip @ 03/26/08 05:08:35 PMreport abuse
Responsibility
Thank you Clark for speaking out about this! My husband and I talk about the rip-offs like this every day but we have no idea what to do about it except gripe to each other. We really don't have choices in who we vote for and there are so few honest people who will even run for office anymore because they can't win. It takes lots of money and clout to be a politician these days and power and corruption is usually behind them. I'm afraid our hands are tied. We are at the mercy of our own government. We have tried to save and only buy a house by putting down a nice size down-payment and having a fixed interest rate, all the things that are honest. Now we see friends and relatives who bought way above their financial means having trouble and whining for help and making excuses. We have two kids in college and it is costing a lot more to live these days. Is there someone who can figure out what it will take to get this government to return to the people. I want to just throw up my hands and move to Alabama and live in a double-wide but I believe we must somehow fight to regain control of our very selves and....our money. Let the revolution begin!
By julia @ 03/26/08 05:04:11 PMreport abuse
Bailout Fever
Amen on your opinion on the proposed assistance to threatened mortgages. I have faithfully paid my mortgage, but more importantly I knew not to purchase a home that I could not afford. Others went and bought homes that were way above thier income levels and are now wanting federal assistance to keep them!?!? The school of hard knocks applies here in teaching them (and the contractors that insist on building nothing but expensive houses) that you have to live within your means! A good general rule for me was multiplying my annual income by 3.5, and that is my maximum mortgage amount. I have owned 3 houses using this rule and was always able to make my payments. I hope that federal assistance to crisis homeowners never gets support - it would only punish the conservatice house buyer and reward all of those who decided to get in over thier heads.
By Robert @ 03/26/08 03:28:37 PMreport abuse
bailout mess
My husband and I have been careful ALL our lives together, and I find it appalling that even grown-ups my age turn a blind eye to this. I have been waiting to retire to get my turn at the "good life", so if I have a choice, heck NO, I'm not helping others. Sorry. Keep your SUV's and mansions.....I'm going to the islands!!
By diane @ 03/26/08 03:05:37 PMreport abuse
It is time to stop rewarding stupidity
Why is it that people can not take responsibilty for thier own actions. There seems to be a large group who think that thier bad decsions should be paid for by everyone else. These people took out loans to get the equity out of thier houses with out looking at the true costs so they could live above thier means. Now these people want tax payers to rescue them and keep them for having to pay for thier decisions.

Personally this reminds me of the old fable of the Ant and the Grasshopper.
By Andrew @ 03/26/08 02:36:37 PMreport abuse
Well said
Well put Clark, couldn't agree more.
By Jason A. @ 03/26/08 01:49:37 PMreport abuse
Bailout
Right on Clark, I couldn't have said it better. We can a least have a small voice and not elect Hillary. I for sure DO NOT want her in the oval office. I just shake my head because I just don't know what I can do as a single individual. It will take millions and millions of single individuals to get anything done, but you can't fight city hall. I am on a very limited budget, and I can't afford any more taxes, higher food costs, clothing, gas etc. Thank you for all you do. I am a true Clark fan and listner. Karen
By Karen @ 03/26/08 01:38:00 PMreport abuse
Right on
Bailouts teach people that there are no consequences for bad decisions. Also, most wealth redistribution is dangerous to our economy in the long run. Not only will Atlas shrug, but the middle-class will too if we keep it up.
By Nathaniel @ 03/26/08 12:30:28 PMreport abuse
Rewarding bad behavior
My wife and I are honest, taxpaying, responsible Americans who bought a modest 3 br. 1 bth. house in Atlanta four years ago. We met with many mortgage lenders, before we went house searching, and all of them offered sub-prime interest-only loans. To my wife's credit she vehemently declined these types of loans knowing at that time we could not afford what the lenders were pre-qualifying us for in the long run.

Meanwhile, people with the same level of income as my wife and I were buying 5 bedroom 3 bath McMansions.

Even if they didn't know their payment was going to go up with their variable sub-prime loan, why didn't they have the inkling to assume their deal was too good to be true?

Now, my wife and I are living comfortably in the same home but are worried our politicians will make us pay to bail out neighbors with homes twice as large as ours? I'm usually fairly liberal and compassionate towards those in need, but this just drives me nuts.

The value of my dollar is decreasing, the hours I work are increasing, and now I'll likely be forced to fork over my money to help people who thought they could get everything for nothing...and now likely will.

Do you reward your children for bad behavior? Do we pay our neighbors credit card bills when they spend frivolously?

If we end up bailing out those who couldn't see their purchase was too good to be true, aren't we essentially feeding the dog that bites the hand?

- Mark
By Mark @ 03/26/08 12:05:36 PMreport abuse
I couldn't agree more
Where were these people when their property values were going through the roof (unrealistically) and they were cashing out on the equity to spend money instead of save. Why should I as a taxpayer bail out their consumption? I think it is a crock! I have trouble making my bill payments each months, but that is a result of my spending habits (and that I can't get my wife to buy into Clark's perspectives)so I don't expect a bail-out from anyone by myself by trimming back and paying down my debt myself.
By Bryan Haws @ 03/26/08 11:32:51 AMreport abuse

America will fail

"Most Americans pay their mortgages. Why should we be taxed to help out somebody who's not paying theirs?"

Well said Clark. Why are the foolish being rewarded? Things like this will eventually make America collapse. Why should people that make bad decisions be rewarded? Is it such a bad thing for people to learn from their mistakes?

Maybe I will skip a couple months of mortgage payments... I could surely use more money in my emergency savings.

By Chris @ 03/27/08 08:50:32 AMreport abuse

Bailout fever

Maybe we need to circulate a popular petition stating our outrage and demanding Paulson's resignation. Maybe the alpha enablers should feel the consequences of their irresponsible behavior.

By Peggy @ 03/26/08 11:42:55 PMreport abuse

Responsibility Amnesty

Seems everyone wants amnesty from all of the responsibilities and common sense. This cannot continue! When do I get amnesty from doing the right thing?
Right On Clark!

By Jennifer @ 03/26/08 09:06:26 PMreport abuse

Bear Stearns bailout

Oh come on surely you are not that naive? Are you saying that this does not go on all the time? The politicians are not there to help us, they are there to garner political power by whatever means necessary to keep and grow their power. It is what the world is and has always been about. Sure there are a lot of good souls out there, but the souls of politicians are not among them.

By Not Naive @ 03/26/08 08:03:41 PMreport abuse

Bailouts

I agree with the atricle and the latest posting. We should be responsible for our own financial decisions. ( My wife and I bought a home by going with 1.5 times our gross income!), my previous home was 2 X my income. With the proposed bailout, we may as well all jump on this wagon and let Uncle Sugar come to the rescue. But, many of us are better people than that. We take responsibility for our debts. This rescue thing is not far from the people who know the welfare system and the single mothers that know exactly how many kids they can have and get benefits, ny more and there is nothing in it for them...disgusting

By Art @ 03/26/08 06:47:43 PMreport abuse

Bail out of Bear Stearns

Clark.

Your show is terrific. I recommend it to clients, and I advertise on it locally. As a NAPFA fee-only CFP, I almost always agree with your insight.

On the Bear Stearns bail-out you are not completely on-the-mark. While I don't like bailing out multi-millionaire investment bankers and thereby rewarding what becomes a morale hazzard, the Fed's intervention may be wise here. Here's why:
- if Bear Stears or any of the big 5 investment banks are permitted to become insolvent, it would take weeks for the capital markets and international banking system to figure out their net positions on Trillions of dollars in the credit markets ( a $45Trillion market). The banking system does not handle unknowns well. Allowing Bear Stearns to fall may well stop commercial banks from lending to each other and thereby jeopardize the entire banking system. This in turn may spark an uncontrolled run on the dollar. You don't want to see that unless you welcome a decade or more of global depression.

By jeff seymour @ 03/26/08 05:52:50 PMreport abuse

bailout special interest

It appear that we have just reason to think that our government does not give a crap about the individual citizen. We are pawns to be shuffled and used at will. I suppose, in reality, we need to teach all our children that special interests and favors are the way to go. Honest work rarely pays off as well as having friends in high places.

By Greg @ 03/26/08 05:34:16 PMreport abuse

Financial market stability

I think if the fed did not act the market would have declined to scary levels and everyone's IRA's, 529's, 401k' etc would have done the same. The financial markets have to gain some stability or things will get even worse. I don't like the out of control spending by our politicians but confidence has to be maintained. The rebate check is a waste of money and Clinton's idea like many of hers will not help. Get the credit markets flowing and the economy will get back on track.

By skip @ 03/26/08 05:08:35 PMreport abuse

Responsibility

Thank you Clark for speaking out about this! My husband and I talk about the rip-offs like this every day but we have no idea what to do about it except gripe to each other. We really don't have choices in who we vote for and there are so few honest people who will even run for office anymore because they can't win. It takes lots of money and clout to be a politician these days and power and corruption is usually behind them. I'm afraid our hands are tied. We are at the mercy of our own government. We have tried to save and only buy a house by putting down a nice size down-payment and having a fixed interest rate, all the things that are honest. Now we see friends and relatives who bought way above their financial means having trouble and whining for help and making excuses. We have two kids in college and it is costing a lot more to live these days. Is there someone who can figure out what it will take to get this government to return to the people. I want to just throw up my hands and move to Alabama and live in a double-wide but I believe we must somehow fight to regain control of our very selves and....our money. Let the revolution begin!

By julia @ 03/26/08 05:04:11 PMreport abuse

Bailout Fever

Amen on your opinion on the proposed assistance to threatened mortgages. I have faithfully paid my mortgage, but more importantly I knew not to purchase a home that I could not afford. Others went and bought homes that were way above thier income levels and are now wanting federal assistance to keep them!?!? The school of hard knocks applies here in teaching them (and the contractors that insist on building nothing but expensive houses) that you have to live within your means! A good general rule for me was multiplying my annual income by 3.5, and that is my maximum mortgage amount. I have owned 3 houses using this rule and was always able to make my payments. I hope that federal assistance to crisis homeowners never gets support - it would only punish the conservatice house buyer and reward all of those who decided to get in over thier heads.

By Robert @ 03/26/08 03:28:37 PMreport abuse

bailout mess

My husband and I have been careful ALL our lives together, and I find it appalling that even grown-ups my age turn a blind eye to this. I have been waiting to retire to get my turn at the "good life", so if I have a choice, heck NO, I'm not helping others. Sorry. Keep your SUV's and mansions.....I'm going to the islands!!

By diane @ 03/26/08 03:05:37 PMreport abuse

It is time to stop rewarding stupidity

Why is it that people can not take responsibilty for thier own actions. There seems to be a large group who think that thier bad decsions should be paid for by everyone else. These people took out loans to get the equity out of thier houses with out looking at the true costs so they could live above thier means. Now these people want tax payers to rescue them and keep them for having to pay for thier decisions.

Personally this reminds me of the old fable of the Ant and the Grasshopper.

By Andrew @ 03/26/08 02:36:37 PMreport abuse

Well said

Well put Clark, couldn't agree more.

By Jason A. @ 03/26/08 01:49:37 PMreport abuse

Bailout

Right on Clark, I couldn't have said it better. We can a least have a small voice and not elect Hillary. I for sure DO NOT want her in the oval office. I just shake my head because I just don't know what I can do as a single individual. It will take millions and millions of single individuals to get anything done, but you can't fight city hall. I am on a very limited budget, and I can't afford any more taxes, higher food costs, clothing, gas etc. Thank you for all you do. I am a true Clark fan and listner. Karen

By Karen @ 03/26/08 01:38:00 PMreport abuse

Right on

Bailouts teach people that there are no consequences for bad decisions. Also, most wealth redistribution is dangerous to our economy in the long run. Not only will Atlas shrug, but the middle-class will too if we keep it up.

By Nathaniel @ 03/26/08 12:30:28 PMreport abuse

Rewarding bad behavior

My wife and I are honest, taxpaying, responsible Americans who bought a modest 3 br. 1 bth. house in Atlanta four years ago. We met with many mortgage lenders, before we went house searching, and all of them offered sub-prime interest-only loans. To my wife's credit she vehemently declined these types of loans knowing at that time we could not afford what the lenders were pre-qualifying us for in the long run.

Meanwhile, people with the same level of income as my wife and I were buying 5 bedroom 3 bath McMansions.

Even if they didn't know their payment was going to go up with their variable sub-prime loan, why didn't they have the inkling to assume their deal was too good to be true?

Now, my wife and I are living comfortably in the same home but are worried our politicians will make us pay to bail out neighbors with homes twice as large as ours? I'm usually fairly liberal and compassionate towards those in need, but this just drives me nuts.

The value of my dollar is decreasing, the hours I work are increasing, and now I'll likely be forced to fork over my money to help people who thought they could get everything for nothing...and now likely will.

Do you reward your children for bad behavior? Do we pay our neighbors credit card bills when they spend frivolously?

If we end up bailing out those who couldn't see their purchase was too good to be true, aren't we essentially feeding the dog that bites the hand?

- Mark

By Mark @ 03/26/08 12:05:36 PMreport abuse

I couldn't agree more

Where were these people when their property values were going through the roof (unrealistically) and they were cashing out on the equity to spend money instead of save. Why should I as a taxpayer bail out their consumption? I think it is a crock! I have trouble making my bill payments each months, but that is a result of my spending habits (and that I can't get my wife to buy into Clark's perspectives)so I don't expect a bail-out from anyone by myself by trimming back and paying down my debt myself.

By Bryan Haws @ 03/26/08 11:32:51 AMreport abuse

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Mar 25, 2008 -- Bailout fever strikes Washington

What others are saying