A few random ponderings -
If no one takes anything else away from this situation, please take the following. Engrave it somewhere, tattoo it on an unused body part, whatever. It may save you someday.
Just as you cannot dig your way out of a physical hole, you cannot spend yourself out of a financial hole. Borrow, perhaps, if done carefully, but not spend.
When war was declared on Iraq, no possibility other than the US being considered blessed deliverers and oil flowing like water in gratitude was considered. The war was supposed to "pay for itself", remember? No conserving resources, cutting back on luxuries, rationing, war bonds, etc. because the war was extremely unpopular. I'm not running down the Bush admin. at this point - what's done is done, and they felt that actively promoting no change in anyone's lifestyle - in fact, just the opposite - was valuable in order to keep up morale. But the seeds of what has come to fruition were planted in this mentality.
Spending money like a drunken sailor is not "patriotic". People were encouraged to spend money they didn't have after 9/11. Add that to corporate greed for a toxic result. The more money spent, the better the profits news, the greater the consumer confidence, the better the stock market did, and the more money the CEOs made. Enron was an extreme example - performance results were frankly lied about in order to manipulate the market.
Credit is an earned privelege, not a right. Debt-to-income ratios guidelines are not the enemy. Very few people have an ironclad guarantee that they will have a job 3 years from now, let alone be making xxx amount more, which is the theory behind ARMs (adjustable rate mortgages). So was a future sound credit environment and steady housing value. One's monthly mortgage/rent should ideally be a maximum of 30% of gross income - loans were being made for 50% of income from the get-go! Once again, greed. Get that commission chell - what happens in 3 years is the home buyer's problem. Yes, everyone should know what he/she can or cannot afford, but I find that not a lot of people are taught economic basics. This should start with a kid's first allowance.
Part of the current problem is that huge firms with fingers in other pies have so many of these holdings. AIG couldn't be allowed to fail. I'm not nervous about this deal because I know something about AIGs assets; for example, the airplane leasing business that may be on the block for anywhere from $30 to $50 billion. The $85 billion figure is a loan, not a gift, at over 11% interest. The company is now helmed by an individual whose goal is to pay back that loan as quickly as possible. I think the government will make a couple of bucks on the deal.
I think some regulation should be loosened instead of tightened. There are plenty of private-equity firms with a lotta cash that love to take a big stake in some of these financial firms, but owning more than 25% means signing on for banking regulation rules, which would mess up other holdings. Yes, some firms will become extremely wealthy, but some will actually use this powet for good. It wouldn't be the first time private firms/individuals have saved everyone's bacon - Houston's own Jesse Jones kept the city afloat during the Depression. Many mega-wealthy people do have a sense of responsibility toward the community - let them express it.
Back on the regular folk level? I'm like a CD skipping over a smudge.
SAVE MONEY. Be it $10 or $1000 a month, make yourself as independent of borrowing money from other people (i.e. credit) as possible. Yes, we have a mortgage, but it's 7% of our income. We have a car note, but it's on a Toyota I plan to keep until it croaks and not an Audi. It's never too late to live below one's means with something as little as skipping lunch out to have an extra $25 a month to put on the credit card debt or the school loan. If I can offer any guarantee, it's that Something WILL Go Wrong. Empower yourself.
Suze Orman has a lot of good common-sense advice, and she can be amusing. If her voice grates too much to watch her show, get one of her books.
Also, do NOT be late on payments! Credit is going to tighten up worse than Wal-Mart jeans in hot water. Better to make a minimum payment on time that a triple payment two days late.
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