Representative Thompson”s excuse for voting against the so-called bailout package is ill-advised. He complains that the bill did not include enough provisions for him. The bill was not an omnibus bill! Of course, it didn”t have such things as bankruptcy protection. As the Democratic leadership has said over and over again, that will come later!
Also, Thompson doesn”t seem to understand the problem. As simply as possible, the problem concerns firms like Bear Stearns and other quasi-banks/brokerage houses. These firms are leveraged anywhere from 300% to 500%, according to Barron”s. When one part of their business (mortgage-back securities) suddenly becomes non-performing, they cannot service other debts of the business. The same thing happens to the businesses that hold the debt of these quasi-banks: it causes a cascade throughout the system.
The result is there is a shortage of money that causes these business to become bankrupt. Then, banks refuse to loan for fear of default that will affect their financial health. So far, the average man has not suffered unless he is involved in the stock market. However, if the package is not passed, this condition will not continue. We will all suffer.
Charles Moton
Lakeport
