times of turmoil

This culture shock thing sure has my brain looping all around. Or maybe it is the gravity of the situation that currently grips the country that I've just moved to. Or maybe its a combination of both of them - I can't quite tell. In any case, the days are feeling a bit on the surreal side here and I'm not having such an easy time wrapping my head around it all.

The government bailout of Freddie Mac, Fannie Mae, and AIG are unprecedented in history. The Albuquerque Journal's Saturday front page story was a black background with white lettering stating the severity of the financial crisis that was averted. Quotes from politicians and economists splattered across the black, crying out how the country was days away from a meltdown and ATMs across the country were hours away from being turned off. If things work out, Ben Bernanke could considered to be one of the smartest and greatest patriots of 21st century America.

My father called for a family meeting on Saturday to discuss what happened last week. He was furious with how we got into this crisis and how Democrats were to blame for this. The facts (not all verified by me) as stated by him were these:

In late 1999, Bill Clinton repealed the Glass-Stegall Act of 1933 (another bill taking its place, the Gramm-Leach-Bliley Act, was sponsored by Republicans and voted into effect by Congress with such numbers that it was veto-proof). The act was created in the wake of the 1929 crash of the stock market to prevent investment banks and lending banks from becoming one in the same. When Clinton repealed the act, the division between investment banks and lending banks became non-existent and the two were free to dabble in the other.

Massachusetts Congressman Barney Frank (D) then led the crusade to get homes for every American. Banks were fined for not lending to people and people were buying houses left and right - even ones they couldn't afford. Banks just figured that if an owner couldn't make their payment, the bank would repossess and the increased value of the house would make up for it. Only problem is that the bubble on the housing market finally started to pop about a year ago and foreclosures could no longer cover the costs. Lending banks took a gamble on investing (in real estate) and were losing - big time. Lehman, AIG, Morgan Sterns, Freddie & Fannie - all were in the papers last week as they became the beginning of what could have been the end of the banking system in the United States. Check your history; when banks fail, so do countries.

It took almost 9 years for the collapse to happen but it came to head last week and it instantly put my father into a tailspin. A quick flash to the Great Depression and its 25% unemployment had my father preaching to me to get a job, no matter what it was, just get a job NOW. My father rarely tells me what to do, leaving me to do what I need to in order to make myself happy and fulfilled, but the impending doom of another possible depression sent him reeling. I imagine that his exposure to the markets and with his company small enough to get crushed by a recession/depression, he has plenty of reason for concern. It is this turmoil that makes my return to the US an uncertain thing, one that makes my head spin in oh so many ways.

So what is to happen? My gut feeling is that Bernanke will prove to be a great patriot and this financial crisis averted. Hopefully Congress will keep their paws off of this and let the people who know best do what they do best and revive the economy. But it does put things into perspective and being unemployed isn't the greatest of feelings at the moment.