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Saturday, September 20, 2008

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KathyR

True.

Is that really "freakin'" in Russian?

Theresa

Ugh. I think I'm going to be sick.
Love your new tagline, btw. A true classic.

shannon

Where do I get my pitchfork and torch?

scott

Is that really "freakin'" in Russian?

I believe it's actually "freak" in Russian, or at least it is according to the online translator I used. Although when run back through the translator the other way you get "addict." As my Russian is extremely rusty (as in, I don't speak it at all), I can neither confirm nor deny either way.

But I read it online. So it must be true.

Right?

J

But what about the наркоман liquidity issue? What would happen if no one could buy or sell their home because there are no banks to offer affordable loans? In the past (1970s, midwestern inner cities after white flight and then bank flight) inability to to get home purchase, improvement or equity loans resulted in home insurance policies becoming more valuable than the homes themselves. Homeowners would set their own homes on fire to collect insurance money on homes that they couldn't sell, refinance or improve due to lack of funds. From what little I understand about this period of history, the inner city liquidity crisis of the 1970s lead to The Community Reinvestment Act of 1977, but not to any effective recovery. With the current crisis, it seems that we all may be "redlined." But there are other problems too. What if no one could buy or start a business because there were no reasonable business loans available? If small businesses can't afford to access capital, then class mobility within the entire country will suffer. The rich who own large businesses will make more money while middle and lower class small business and micro business owners may be forced out of their businesses because they won't be able to sustain growth due to lack of funds. But perhaps the biggest problem of all is the cash management issue. If banks fail, would everyday citizens could be reduced to using check cashing venues and money orders to conduct normal cash management functions. This is very, very bad . . . like hiring a vampire to babysit.

This bailout is supposed to be a means of bribing horrible, inefficient, large banks and thrifts to continue performing their intended, and unfortunately crucial, functions. It is not to reward them for being bone-headed at the expense of the little guy. That much, I think, needs to be understood. However, what the bailout doesn't address is our reliance on large banks in the first place. If you look at the FDIC's website, about 5 banks have 80%+ marketshare in any given market . . . and these are the same banks over and over and over again. In the 1960s we were smart enough to spread of our eggs out over hundreds of local small baskets. Now, we effectively have all of our eggs in 5-10 precariously balanced large baskets! I believe this might be the real issue.

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