CONGRESS RESPONDS TO SAVVY TAXPAYERS AND VOTES "NO BAIL"
Congress Said: Credit will dry up; banks will not make loans to consumers wanting to buy cars and small business owners that want to hire employees and expand.
Savvy Taxpayers Said: (1) I can drive my car a little longer. In the meantime I could save the additional money I would have spent on the new car. When the dust clears I can have a bigger down payment and get a better deal. (2) My business is well managed. I have reserves. So I can defer making a loan by managing accounts receivable better, and reducing waste, providing better customer service, and being more creative or flexible than a company that is judged "too big to fail?".
Congress Said: Millions of people will lose their jobs.
Savvy Taxpayers Said: (1) If credit is less available, won't most job holders respond by making less impulse purchases, shop more at discount stores, prepare more meals at home, drink tap water which is safer than some bottled water, or drink Maxwell House instead of Starbucks coffee? (2) If consumers were to redirect their spending to retailers that gave them better value, wouldn't the sales of these stores rise, while the sales of their less efficient competitors decline? Then at worst one store's reduction in employment could be offset by another store's increase in employment. (I know somebody will say, isn't that what happened with Wal-Mart vs General Motors where $20-30/hr manufacturing jobs were traded for minimum wage jobs?) Yes. But which company was just approved for a $25,000,000,000 government bail out loan? Hint: not Wal-Mart) (3) Haven't many "too big to fail" companies already fired, laid off or "bought out" and early-retired 10's of thousands of people, yet some of them are still in trouble? And they are still not able to compete, yet they want a bail out? (4) Don't you know one or two people at your company who goof off regularly and don't pull their weight. Yet you are busting your assets. Do you mind if these kind of people get axed?
Congress Said: Millions of homeowners have already lost their homes and millions more will suffer that fate if we don't do this $700 thousand million bail out?
Savvy Taxpayers Said: I've heard an estimate that there are 1 1/2 million mortgages in default. Let's assume that number is right and that the Government gave each homeowner a grant of $100,000 to catch up payments, pay down or pay off their mortgage. How much would that cost us taxpayers? $150,000 million. Problem solved and we taxpayers save $550,000 million. Why didn't President Bush and Mr. Paulson make that proposal to Congress? Why hasn't a Congress person brought up that idea? Couldn't the grant be made bigger, say $200,000 per homeowner with a delinquent mortgage? That would cost $300,000 million. We taxpayers would still save $400,000 million. Why wouldn't that be a better idea? Could it be that most of the toxic mortgages are not those on Main Street and
M. L. King Boulevard? Seems that most of the dollars spent may be for mortgage holders working on not just Wall Street, but Commerce Street, 5th Avenue, and Rodeo Drive.
Congress Said: Financial markets will crash and wreck the values of retirement accounts.
Savvy Taxpayers Said: I've withstood steep market declines over the past 20 years. On Black Monday in October 1987 the stock market fell over 20%. By the end of 1987, the index was higher than at the beginning of the year. The DJIA was under 2000 at that time. Today it is over 10,000. If I had stayed out of the stock market I would have missed that 400% increase. Also, I didn't panic and stayed in the market after newly-elected President George W. Bush took the oath of office. During his first three years I lost about 1/3 the value of my portfolio. You remember 9/11 don't you? But the market recovered strongly from that and my retirement account is solid.
Today, you and I witnessed a strong display of taxpayers making our voices heard in Congress and seeing that Congress responded in a manner that indicated that our voices were heard. This is democracy, capitalism and faith at its best.
NOTE: THE DJIA Index closed down today Monday 9/29 at 10,365.45, a drop of 777.68
(-7.0%). This newletter is not intended to give you investment advice. Financial markets rise and fall and can result in losses as well as gains. Please consult your financial advisor.
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