Was the Banking Bailout of 2008 a Bad Move?

by fwhagen Thu, 16 June 2016

Ok, I am not an economist.  I think I might have been if the computer industry didn’t exist, but I am not.  I'm not a historian, either.  This is all my personal opinion.

In 2007 – 2009, Trillions of U.S. Dollars were spent to “bailout” the U.S. financial system.  Many, many people thought this was a terrible way to spend taxpayer money in order to save banks, insurance companies, and mortgage brokers.  Most still do.  Sure banks make mega-millions in profits and few people hate mandatory insurance as much as I do.  “Let ‘em fail!” I have heard many times.  “Why do my taxes have to go to pay off fat-cats.” as well.  “Where’s my bailout?” was my favorite.  (Yes, sarcasm on my part.)  But was it so bad?  I’m not so sure.

Let’s go back a few years.  1929:  The start of the Great Depression.  Ask yourself, what caused the Depression?  If you’re like most Americans, as I was not so long ago, you will answer:  The Stock Market Crash of 1929, Black Tuesday.  But that’s actually not really true.  It was a trigger, certainly, but not the cause.  The thing that really pushed everything off the cliff was panic.  Panic over the banking systems.  People no longer trusted the banks and wanted all their money out, and now.  Back in those days, nearly all money was real.  And since much of it was tied up in investments, loans, etc., when millions of customers showed up and wanted their money, the bank locations didn’t have it.  Obviously.  That is still true today.  You wouldn’t expect your local BofA to have $Billions in the vault at every location.  So when bank clerks said, sorry, we’re all out, people freaked.  Of course, nobody panicked and paid back all their loans too, right?  So banks crashed too.  And suddenly, because the dollar was tied to the Gold Standard, and there was no money, the price of gold fell.  Less cash means the amount someone is willing to pay for it falls as well.  This had a larger cascading effect that impacted the entire world economy, which is the reason why most governments have rejected tying money to physical commodities.  And thus started the Great Depression.  BTW, inflated real estate pricing was a primary factor back then too.

Back to today, almost.  We could go back to the ‘90s and note that the Clinton administration (hopefully, the ONLY Clinton administration), persuaded Congress and/or the banks to make it easier for less… (uh, hard to find a good word to go here.  “capable” comes to mind) …qualified (?) people to get mortgages.  And sub-prime mortgages became a thing.  Banks were forced, or coerced, or agreed, to give out loans to people who were traditionally considered high-risk.  This radically increased demand in the housing markets.  And prices began to rise.  I was actually very lucky to get in early with a mortgage I should never have qualified for, but I made good on it.  After 10 years or so, the peak hit and now some lendees were unable to keep up with their really bad contracts and started to default.  This is normal.  Pricing started to correct, and more houses were on the market.  This is also normal.  And then there were more defaults and prices fell and banks were left with properties with loans that were much higher than the value of the housing.  And the bubble burst.

So in 2008, there are many banks that are left with assets they are unable to liquidate and obligations they can’t meet because of it.  So what do you do?  Let them fail?  Sure, why not.  I certainly never bought the “too big to fail” argument anyway.  But consider this: 

Let’s say I have $100,000.  What is my net worth?  Easy, $100k.  Now, you would like to buy a house, so I lend you $100k because I know you have a job and will pay me back with some interest.  So, what is my net worth now?  $0?  Well, no, you owe me $100k, so technically that money belongs to me.  $100k?  Actually, no, I expect that you will pay me interest on that, so I should be ahead in the end, and if you don’t pay, I get the house and whatever you paid so far.  Looks good for me, right?  Ok, now let’s say that you wanted to buy a house for $150k, but I only have $100k which is mine, but I am holding money for Jim long-term, in order to keep it safe for him, for a tiny fee, of course, after all my big vault is pretty nice and very safe.  So Jim stores $75k in my vault and wants access to some small amount of it at any time.  Ok, so I tell him I am going to use some of that money to help you out, so I give you a loan for $150k and keep $25k for Jim when he wants it.  Everyone is happy.  Until you lose your job.  Now you can’t pay me.  I can’t operate without rent and payroll, so I have to do something.  I could use Jim’s money, but he won’t be very happy about that, so I have to take the house and try to resell it.  So what is my net worth now?  Harder, but I have a $150k house and $25k of Jim’s cash, but I owe Jim $75k, so I am right around $100k again, right?  Suddenly Jim loses his job too, but it’s Ok, cause he has $75k saved up in my safe vault.  So he comes by and would like to have it back, please.  Of course, Jim, but I only have $25k right now.  Now what?  Jim needs his money but I don’t have it.  Jim blames me.  He says I should never have lent you the money, but the Fed said I really should or else.  So I have to liquidate whatever assets I have to pay Jim, which is only fair.  Now what’s my net worth?  And what if I can’t raise Jim’s money?  I will be ruined!

That’s the situation the U.S. financial industry was in by 2008.  Multiplied by millions in size and complexity.  By the way, I am not saying the banks were blameless.  ARM loans are just plain wrong.  I don’t normally mind preying on the stupid, but there must have been some shady deception going on with some of those.  In the super simple example above, my net work is still actually $100k, even though it’s all tied up in a bad investment.  The bank would sell the house eventually, and probably take a loss.  The hope is that the loss is less than the amount paid into the mortgage before the default.  And the 3rd party would get their money as promised.  The problem comes when the 3rd parties cannot wait for the physical assets to be liquidated and start to panic.  The Fed recognized this in 2008 and did something about it.  They made funds available to the banks in order to be liquid and not cause a panic.  The actually learned from the 1929 Crash.  BUT, and this is where I blame the news agencies, these were NOT gifts.  They were short-term loans with interest, albeit very large.  I need to look it up, but I believe they have all been paid back to the Fed (Us, the taxpayers), with interest.

So in the end, the banks took a loss but were not destroyed.  The housing industry eventually settled for the most part.  No panic ensued, although I suspect some people were disappointed by that (*cough* CNN *cough*).  And the Fed actually made a profit.  Unfortunately, a lot of people were hurt by buying houses they shouldn’t have and ruining their credit when they defaulted, and many more ended up with houses they will probably never profit from.    Many bank executives lost their jobs over this too, which no body is upset about, I imagine.  And, I don’t think the Clintons were hurt too bad.  It’s not like they’d try to run for public office again or anything….  *sigh*

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Filed Under: Life | Politics | Rant

Does This String Have Anything In It? in C#

by fwhagen Wed, 04 March 2009

The following code should be failed by the C#.NET compiler:

if (eventName != null && eventName.Length > 0)

It should never be used.  People, always use this instead:

if (!String.IsNullOrEmpty(eventName))

It is much more compact, clearer, singleton, and as a String class method, more efficient.

So stop it!  You will thank me later.  Not to mention:  Where are your parentheses?  Block your code.  Other people have to read it too!

That is all.

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Filed Under: .NET | Programming | Rant

Domain Transfer For Fun and Headaches

by fwhagen Wed, 03 September 2008

Well, the new domain is finally up.  FWHagen.com if you want to see it, but there is nothing there yet.  I purchased the hosting account 2 weeks ago and have yet to have the domain name properly transferred to the provider. 

Many years ago, I decided I wanted to have FWHagen.com for myself, for professional development and personal/family use.  I took a chance on the upstart company GoDaddy when they started out because they were pretty cheap.  I was very pleased with their service, having dealt with Network Solutions for years before at work.  That is until this past week, when I tried to transfer it.  After waiting for several days, I discovered that the account was "locked" to prevent any accidental or unauthorized transfers.  If you have ever transferred a domain before, you know that is a bunch of crap.  I had to personally authorize the transfer, so why the lock?  Because of the subsequent failure to transfer, I have to wait 60 days to try again.  The waiting period is ICANN specified, and I really don't have any logical problems with that, except that GoDaddy now gets to hold it for another 2 months. 

I was able to forward the DNS records over, so it works for now.  And I have a long time left to get the domain settled, as well.  It is just very frustrating to deal with underhanded greed like that.  For the sum of $10/year. 

UPDATE [19:50]:  I was wrong about GoDaddy.com.  On my way home this evening, I got a call directly from them expressing concern about my problems.  Now, here's the thing, I only posted my concerns here.  They took the initiative to track me down and fix the problem.  Well, tracking me down in the sense that I posted my domain name and they called my contact info, which only they have.  Long story short:  I am so impressed with their commitment to personal service that I am cancelling the transfer and will simply use DNS forwarding for my new site, as it works perfectly well.  I will continue to use them as my registrar and will definitely use them in the future whenever I can.  BTW, the 60-day wait is ONLY for sucessful transfers.  It does not apply to failed due to locks or privacy safeguards.  And the $10/yr jab?  Only heightens my impression of them.  They surely spent more than that in time and effort on one measely IT guy's satisfaction.

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Filed Under: Blog | Rant

Flash - Web Necessity or Overbearing Evil

by fwhagen Wed, 09 April 2008

Just why do I hate Flash requirements on sites so much?  I mean, every time I see a nice webpage marred by some Flash applet, I cringe and wonder why they decided to make that choice.

It used to be that requiring a user to have Flash installed just to visit your site was an inexcusable arrogance on your part as a web developer.  And then there was the bandwidth requirements for the content; after all, you are developing locally, so who cares that the end-user has to wait?  Well, you should, for starters.  And many times I see Flash, even still, being used as an easy way out or to simply animate a graphic. So historically, there were many, many reasons to never use Flash except for very specific applications.

Today, many of those arguments are not valid.  I believe all browsers have Flash preloaded, and bandwidth concerns are almost negligible anymore.  So why do I still find Flash to be a over-bloated gorilla on an otherwise clean design?  After all, I find the exclusion of PNG support on many browsers today to be inexcusable, but the inclusion of Flash a mere convenience.

Unfortunately, I don't have any clear answers.  To me, Flash doesn't belong on most websites I see today.  Yes, Flash does have it place in many online applications, but not as a graphic element.  And I believe that is the crux of the argument:  it is not a good replacement for some well designed image elements.  I am an old school developer that believes that good, solid, static design will always be superior to flashy, dynamic design in the long run.  Do not mistake that statement as a call to return to HTML as the primary development tool.  I refer to design; not content, which should always be dynamic, save of course for documentary content.  In my opinion, as a former CBT developer and current Intranet developer and BI Programmer, all design should be restricted to good use of CSS, PNG/GIF/JPG, and XHTML.  And there is also the fact that it is a closed standard.  Or actually, not a standard at all.  Flash is owned by Adobe, and is subject to their whims.  I just don't think that belongs in general web design from an end-user perspective, much the same way that I don't think it's right to use PDF as a publishing medium for web documents.

And don't even get me started on the crapware/bloatware/spyware that is a mark of Adobe products lately.  I flatly refuse to use Adobe's PDF reader anymore, but use Foxit Reader instead for any PDF files I might need to read.

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Filed Under: Programming | Rant

Are You an OS Fanboy?

by fwhagen Wed, 27 February 2008

The "Operating System Wars" are ridiculous, in my opinion.  There is NOT one better than all the others.  There IS a better fit for me than for you, or the latte-drinking poser using wi-fi (and nothing else) at the bookstore.  So if you have really strong opinions on the matter consider the following question:

Do you have any swag or merchandise that wasn't explicitly given to you?  In other words, did you PAY for a bumper-sticker, T-Shirt, laptop bag, etc. that is branded with your object of affection?

If the answer is "yes", then you are a fanboy and as such your opinion is worthless.  Because if you love a flavor of Linux, but would loathe it if Microsoft sold it, then you really don't have anything useful to add.  Or if your a Mac-fanatic mainly cause it ain't Micro$oft, dude, then you actually don't have an opinion, do you.  Even the Vista lovers who just think it's pretty, can't begin to evaluate the merits of the kernels.  You are only allowed an informed opinion if you actually have information.  Ok?

Also, if the answer is "yes", then shut up!  I'm sick of hearing it.

Thank you.

And before I get whiny comments, yes, there are other indicators that you might be a fanboy.  Consider them too.

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Filed Under: Rant

What Is Wrong With Apple?

by fwhagen Tue, 05 February 2008

No, really, what is wrong with that company?  During the Super Bowl (oops, now I owe the NFL money for using their trademark), they ran ads for their new laptop/notebook/purse.  The advert focused on one crucial feature:  it's size. 

It fits in an interoffice envelope. 

That's it.  It fits in an envelope.  Ok.  So?  Who buys a computer because it fits in an envelope?  Who cares!?  Does it run the latest software, games, 3D-rendering suites?  We don't know.  Wireless?  Firewire/USB/Bluetooth?  No idea.  Two buttons on a mouse?  Does it even have one?  But I can sent it to you via Interoffice mail!

This is but the latest example of what's wrong with Apple.  If it doesn't matter what your computer is capable of, do you even need to have one?  Especially one that is that overpriced?  I am tired of this company diluting the computing gene pool.  Call me old; call me a tech-weenie; call me whatever you want.  Form is important; but for a tool, NEVER over function.  Never.  Get out of the business and go sell purses.  Of course, then they'll claim they invented them....

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Filed Under: Rant

Concert Tickets and Scalpers

by fwhagen Wed, 21 November 2007

Someone help me, please.  I don't understand why scalpers are "evil profiteering bastards" and Ticketmaster and the venues are not.  What is wrong with buying any commodity and selling it to someone else at a higher price?  It works well on Wall Street, why not in entertainment.

"Face Value" is a myth.  The value of an object is the price you can assign that object and find a buyer for it.  If I buy a comic book for $1 and sell it to you for $50, then it has a value (to me and you) of $50.  If someone buys 10 tickets to Hannah Montana for $50 each and sells each one for $150 each, what is the value of those tickets?  "But the scalper is not a fan, he should not be able to buy tickets."  Why?  Give me one rational, valid reason.  The scalper is no different than any other commodity broker.  He takes a risk and typically reaps reward; but only if the market will bear it. 

If you don't like the tactics of the scalper, fine!  I don't either.  Don't buy from him.  But know that if you do, you validate his business model, and therefore condone his action.  On the other hand, I guarantee that when it is no longer profitable, rather it becomes unprofitable, the practice WILL cease.  Do not force legislation, do not cry about it.  Stop supporting them, and they will go away.

By the way, the people you should be angry at are the ones who paid $1000 for tickets to Hannah Montana.  Shame on them.

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Filed Under: Rant

Daylight Stoopid Time - Fall 2007 Edition

by fwhagen Fri, 26 October 2007

Here's your reminder that DST is ending again this weekend and you will be losing your free hour everyday.  But Wait!!  Congress moved it this year:  It's actually next week!  Yay!  Another week of free hours.  It a good thing Congress is saving us Time and Money, and more than ever before!

StandardTime.com

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Filed Under: Life | Rant | Worse Than Failure

The Emperor's Lottery

by fwhagen Thu, 30 August 2007

When I am Emperor, I will have a quiet policy to fire any IT worker who starts an office lottery pool.  Not only are they wasting the time of people that are trying to get good work done, but they obviously do not have the mathematical and statistical skills to properly perform a programming or development task correctly.

What they do on their own time is, of course, their own business.  I love those who contribute to Ignorance Taxes.

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Filed Under: Rant

Everybody Needs a Holiday

by fwhagen Wed, 25 April 2007

I guess today is Administrative Assistants Day.  Thank God, I know Iwouldn't be able to do my job everyday without them!  Who would... um... ah... Wait, I don't have one.  But it's a good thing they have their own special day.

You know, I think the guy who sweeps up the floors at the slaughterhouse needs a holiday too.   How about Offal Removal Specialist Day?

Here's a link!  link

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Filed Under: Rant

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