It is odd how many people are totally ignorant of the import of the current situation. They think, "Good, it's about time the banks had trouble. Now, they will know how we feel." Yes, they will, but it is very likely, you will feel worse. Failing banks lead to reduced money flow which leads to layoffs. You will also have real problems with any 401Ks and similar programs.
Another oddity shows up in the Wachovia crisis. Wachovia is being bought by Citigroup. Citigroup is also in trouble. They haven't made a profit for 3 quarters. They will be selling $10 billion in new stock. Who will buy it? If no one does, will they be in deeper trouble?
All of these bank problems stem from the failure to follow the normal bank rules for home mortgages. They gave money to people who could not afford the loans. They lent more money to cover the down payments. They became creative. When banks become creative, we all lose.
Yesterday's bail-out vote reminds me of the famous Treaty of Little Big Horn.
That outstanding negotiator George Custer stated, "We wouldn't be in this mess if it weren't for the Sioux."
After the negotiations so dramatically ended, one of his helpful lieutenants was heard to remark, "Who knew they would be so thin skinned?"
