Our current financial crisis was a series of bad decisions stacked on top of each other, which multiplied the terrible, yet totally predictable, outcome:
- Making home loans to borrowers who realistically could not afford to make the payments.
- Allowing loans to have ridiculous attributes, such as no money down and no proof of income
- Authorizing FNMA and FHLMC to purchase those questionable loans from lenders
- Minimizing the quality of some of those loans when packaging them into mortgage-backed securities (MBS)
- Enabling certain derivative financial instruments, based on low-quality components of those MBS’s, to be created and sold, thereby multiplying the exposure to risk (setting up the potential for a domino effect).
- Blindly trusting risk ratings given to the questionable bonds without rational analysis of the core/real aspects of the underlying loans.
Given the various players in the financial chain, there was tremendous incentive to push the limits… to leverage (and even cheat) at every step… and so that happened… in spades!
Where would we be today if… say… just the first step was avoided. Would any of the rest of the bad things occurred? Any reasonably intelligent person could have projected the results but common sense was ignored… and skewed “talking points” kept the lie alive until reality caught up.
NOW, fast forward to today and the health care situation and the new law:
- The government Ponzi scheme called Social Security is mathematically flawed and is rapidly reaching the point of implosion due to the all-too-foreseeable shifts in the population of workers vs. retirees… but nothing of substance done about it.
- Many union and government employee benefit plans are actuarially unsound, having been structured on defined BENEFITS rather than defined CONTRIBUTIONS, yet go unaddressed.
- Greater financial and reporting burdens are placed on employers.
- Fails to reform tort law and frivolous medical malpractice suits, which has led to skyrocketing insurance costs.
- Adds millions of people to the “demand” side of the industry while doing nothing about the “supply” of medical professionals.
- Adds large expenses (political payoffs) having nothing to do with health care.
Does anybody REALLY think the problem is solved?