I Hate To Say...

Upon reading the New York Times website this morning I found a couple of interesting things I wanted to share. One is the article, Don't Just Spend, Do It Wisely. Not that it says exactly what I said in the post, State of the Economy, but the idea behind post articles is essentially the same. Do your research. Spend your money in the best way possible. Best in that sentence could mean alot of things but I intend for it to mean the way in which the most utility will be brought about from it. The way in which it will create the biggest return on the investment. The NYT article was an extremely macro version of my entirely micro post but both are equally applicable. Granted the macro version was applicable to Obama, and my micro version was applicable to everyone. Maybe I should write for the NYT.... maybe not haha.

The second article I found interesting was titled Saving Citi May Create More Fear. In economics there is a thing called moral hazard. In non-economics terms moral hazard is when a party is protected from risk, they will then become riskier than they would have been had they not been protected. It applies to such things as insurance, finance, and even possibly people who wear seatbelts (we won't get into that though). In the article they have the sentence

"But longer term, the new bailout could haunt regulators and taxpayers. The move ultimately may encourage banks to take more risks in the belief that the government will step in if they run into trouble."

Sounds to me like the definition of moral hazard. What do I propose to do? Someone write this into congress for me, cause it is one of the more decent ideas I have had.

The banks know who is defaulting on their loans. And the government is giving money to the banks to make them able to absorb the fact that these people won't pay the banks back. The government should give money to the people who are defaulting and give them the choice of a bank to switch their mortgage to. This way the people will pay their loans back, and to banks who are willing to restructure and give proper incentive (like not making more risky loans). This will allow the banks that are the best to flourish and the banks that we are bailing out to disappear. People will maintain their assets and not be forced into foreclosure or bankruptcy. For the future, banks will know that they cannot be risky and get bailed out, they will know that the consumer cares about smart banking policy and money security and that they have to make the right decision to stay in business (like most other business). Banks are here to serve the people, as is government, when the banks don't serve the people the government shouldn't serve the banks (who by the way are taking in tons of capital from Big Brother and not making as many loans as they should be). ...think about it.