Take Me To Post Comment Form People are a bit confused by my Friday column.

Unfortunately in print I have a specific amount of space, which really is the curse for all print columnists at all levels. Big ideas – small writing space. So I’d like to take the opportunity to further clarify my position.

All investment carries risk – anything from building a house, buying a mutual fund, starting a business, even the savings account at your bank or keeping cash under the mattress. There is always risk. This means there is always risk you could lose your money.

However, some investments have greater risk than others but you cannot eliminate risk. You can only limit exposure to risk. There is no such thing as a sure thing. Anyone who says so is selling you something.

And those who ignore that risk usually end up dealing with the consequences.

As for my column, yes I mentioned the Bush administration. I didn’t blame him for the problem (I blame the Federal Reserve primarily), but I do not approve of his proposal because I feel a bailout will funnel money to rich, irresponsible banks and investment fund managers. Like I said, you don’t give a drink to a drunk or give money to a bad money manager.

If you gave money to a relative for a down payment on a house and they irresponsibly blew it on a vacation instead, would you give them money the next time they asked for a down payment? I wouldn’t.

How will using the tax dollars of middle class Americans to bail out the rich help the typical American? It won’t. As I said, the national debt goes up, the value of the dollar goes down, which results in inflation which results in diminishing purchasing power for all Americans. (Except the bankers who just got an infusion of $700 billion dollars)

I also blamed Treasury Secretary Henry Paulson, who’s so clueless he tried to get a failing business to give him $7 billion to help prop up another failing business. He sat down with Merrill two Sundays ago. Merrill was bought out for $50 billion on Monday. How clueless is this guy? Why do we want him running the “financial rescue if he wasn’t even aware that Merrill couldn’t give him $7 billion even if they wanted to?

I’ve also – repeatedly – placed blame on Alan Greenspan and The Federal Reserve for “rescuing us from the financial crisis after the tech bubble burst. Their unnaturally low interest rates created an environment of easy credit, whereby people invested way more in the real estate market than they were able to afford. This unnaturally drove up the price of real estate for years. The very same loans the government wants to buy are on properties that have already lost 50%, 60% or their value – some even more.

Why should I agree that my tax dollars should be used to bailout idiot investors and bank managers that thought the real estate market would go up forever? I shouldn’t.

The loans that were put into these MBS were legitimate loans, that much is true. Unfortunately, they were just made on properties with inflated values fueled by rampant speculation from small and corporate investors alike. Perhaps these investors and MBS purchasers should not have completely discounted the risk of the real estate market going flat or even declining. But they did.

They should deal will the consequences of ignoring risk.

The problem, as I stated, is that the banks (and nearly everyone else) thought the real estate market could go up 10% - 30% annually, forever. Couldn’t they see they were continuously increasing the value of real estate by unnatural increments, repeating the mistakes of the tech bubble? They couldn’t.

Then why reward them with more money? They should deal will the consequences of ignoring risk.

And it’s Republicans, specifically House Republicans who have torpedoed this bill because of its irresponsibility. Yea!! I hope they stick to their guns and go even further to say no bailout – no way. I hope the Blue Dog Democrats join them. The FACT is the White House plan called for the government to buy and own these loans. Loans that are now worth 25-30% of their original value. Bad idea.

Aside from the fact that the government should not be buying investment vehicles, do we want them using tax dollars to buy something for $100 when it’s only worth $25? How irresponsible is that? What will that do to our future?

Politicians always talk of the children. Bush’s proposed bailout would add $500 billion to the national debt with a snap of the fingers. Who will pay for it? Our children out of their labor. With all the complaints about school being under-funded, why do we want to funnel tax dollars into failed investment vehicles? We don’t.

Personally, I’m not that concerned about a recession. I realize and have always realized that the economy is subject to the ups and downs of business cycles. Some affect one sector, some affect multiple sectors, and some affect most of the economy. The longer you try to artificially stave off a recession the longer the recession is when it finally hits home.

Let's rip off the band-aid and get it over with.

The way to protect yourself in a recessionary job market is to increase your set of marketable skills. This leaves you with flexible employment options. If you are only trained to do one type of job in a down economy, you could be in trouble.

My advice: learn a new, marketable skill.

How should all this play out? The businesses should be left to fail. Will this result in widespread disaster and panic? Not likely.

What will happen is just like what happens at an auction. Businessmen, investors and banks that have invested wisely over the years and have limited their exposure to MBS will line up to purchase these banks and financial institutions. The little guys (tellers, secretaries, low-level managers) will likely keep their jobs. Most of the branches will stay open.

Upper management, however, will be sacked. After all it was their poor leadership that ran the company into the ground. Why should they be bailed out for poor business performance? After crummy upper management is shown the door, new management from the well-managed company will move these businesses toward a more profitable business model.

What will happen if we bail these companies out? Well, as I said, we throw good money after bad. This artificially keeps the price of these companies high, preventing a more efficient operation from coming in and purchasing the mismanaged one. Not to mention, that you’ve just given tons of newly printed money to a poorly run company. They will waste the money and not use it as efficiently as another.

This money will eventually be collected from the tax payer. In the short run, there will be inflation, rising prices and a decrease in purchasing power. In the long run, increased taxes.

Bottom line: real estate speculation at all levels is the cause of this crisis. Step by step:

-Low interest rate encouraged people to invest in more house than they could afford causing real estate prices to rise.

-Rising real estate values encouraged small investors to buy property with interest-only loans in the hope they could re-sell the house at a profit before the principal came due.

-Increased real estate activity encouraged more developers to build condominium and residential developments in hot markets with the idea that small investors would buy the pre-built properties and sell them at a profit when completed.

-Banks, mutual funds and investment banks bought up MBS because of the good rate of return and because the real estate market was soaring. (Not every financial institution exposed themselves to this risk)

-Most important of all: every one thought the real estate market would go up forever and they all ignored the possibility of a down-turn in the market.

When you ignore the potential risks in your actions, you correspondingly don’t anticipate the possible consequences. These banks ignored the consequences, but should be made to suffer the consequences of their risky actions.

It is the rich upper managers and board members of these banks clamoring for a bailout. They are fixin' to lose their jobs.

I say let ‘em fail.