David Frum on The Subprime Mortgage Crisis: Who Deserves to be Bailed-out?
David Frum is the author of five books, including two New York Times bestsellers: THE RIGHT MAN: The Surprise Presidency of George W. Bush (2003), and co-author with Richard Perle of AN END TO EVIL: What's Next in the War on Terror (2004).
Frum is a resident fellow at the American Enterprise Institute and writes a daily column for National Review Online. He contributes frequently to the editorial pages of The New York Times and The Wall Street Journal, as well as the Great Britain's Daily Telegraph and Canada's National Post. He appears regularly on CNN, Fox News, and the BBC. In 2001-2002, David Frum served as a speechwriter and special assistant to President George W. Bush.
Question: Is there a governmental responsibility to bail out sub-prime borrowers?
David Frum: In this financial crisis we're seeing, one of the big conflicts you have in the world of finance is between your long term and your short term needs. We have no responsibility to bail out short term borrowers. We have no responsibility to bail out sub-prime borrowers and we certainly have no responsibility to bail out sub-prime lenders.
The problem is we may have no choice.
That there is this old joke how, if you owe ten dollars, you have a problem; whereas if you owe ten billion dollars, the lender has a problem.
And that is sort of the situation that the Federal Reserve and Ben Bernanke face. And so they have been doing a lot of things, like the bail out of Bear Stearns that probably, if you ask them in the abstract, "Would you ever want to do this?" they all would answer, "No, no, this is terrible policy."
But when you think of the alternative to this terrible policy error is some kind of unpredictable explosion, you tend to do things that you have a feeling maybe you shouldn't do.
Question: Why bail out corporations instead of lenders?
David Frum: But the reason they bail out the lenders, we have been through this with many previous financial crises. Maybe the precedent that's most relevant here was the bailout of the hedge fund in the 1990s called Long Term Capital Management.
This was a hedge fund that had developed some very sophisticated financial instruments that allowed them, with some hundreds of millions of dollars in capital, to control tens of billions of dollars in debt. And then they couldn't meet their obligations. And then there was this panic, because if they started calling their loans, if they weren't able to pay their obligations, it would set off like one these chains of firecrackers you see on a Chinese New Year that would just ricochet around the whole planet, destroying all kinds of financial institutions--because the world is wrapped in a network of interlocking commitments and if any large number of those commitments fail, many more fail along with it.
Just think about your own situation. If the people who owe you money tell you they're not going to pay, there are a lot of people to whom you owe money that you are now not going to be able to pay, and so it goes.
And so central banks mesmerized by the terrible disasters of not only the Great Depression, but what happened in the 1980s in Japan, when Japan was stuck in a kind of one-country Great Depression all of its own, they know that the best and easiest way to deal with these kinds of problems is to prevent them from arising. And so when you have a large financial institution that can't pay its bills, they tend to step in, not because they have any affection for that institution, but because they're terrified of what might happen. And also because modern financial instruments are so complicated, that when you take over a Long Term Capital Management or Bear Stearns, you simply don't know what is buried in the vaults. What kind of explosive equipment they have down there, metaphorically, obviously.
So that's what happened with Bear Stearns, is that Bear Stearns had all these very complicated financial instruments and the Federal Reserve of New York was terrified that if Bear Stearns failed, and people took it over, and they began calling these instruments, it could set off a chain reaction of unimaginable, unknowable proportions. And so they end up, very much against their better judgment, bailing them out.
Now, they tried to impose a punishment on them by trying to bail them out at a price where people who had a hundred million dollars on Tuesday, now on Thursday have three million dollars. It's still three millions dollars; it's better than nothing; but many of the owners of Bear Stearns did take a big financial hit.
Question: What the difference between a player like Bear Stearns and an individual?
David Frum: Okay. Let me give you an analogy. You're the fire department and there's a fire in your town and you have to make a choice about where you're going to direct your fire engines.
Over on one side are a string of humble little cottages owned by hard working people who've earned their prosperity and for whom the house represents everything in the world. On the other side is a giant warehouse owned by some faceless corporation, owned by very rich people, and it's full of explosives.
And you have to stop the fire in one place of another. Now, there's a kind of moral sense, a kind of social sense, where you say, "Let me save the homes of all the little people." If the fire consumes that big warehouse there's going to be just a 10 kiloton explosion in the center of your town. And so reluctantly you say I have to deal not with the most deserving claimants but with the potential for greatest catastrophe, and so all the fire engines go to the big warehouse full of explosives because that's where the worse damage could occur.
And that is a little bit about what tends to happen in these financial bailouts; that the energy, the effort, the bailout goes not to necessarily the deserving people, although I'm not saying the sub-prime borrowers are so deserving, but not to the people with the neediest situation, not to the people with the greatest moral claim, it is to the place of greatest danger.
Recorded on: May 5 2008
The lenders will get bailed out because we have to.
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The results of this study showed depressive symptoms being highest in adolescence, declining in early adulthood and then climbing back up again into one's early 30s.
- A 2020 Michigan State University study examined the link between teen social networks and the levels of depression later in life.
- This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s.
- There are several ways you can attempt to stay active and socially connected while battling depression, according to experts.
The study suggested that teenagers who have a smaller social circle showed higher rated of depression later on in life.
Credit: asiandelight/Shutterstock<p><a href="https://www.eurekalert.org/pub_releases/2020-09/msu-tsn093020.php" target="_blank" rel="noopener noreferrer">A 2020 Michigan State University study</a> examined the link between teen social networks and the levels of depression later in life. The results of this study suggested teens who have a larger number of friends in adolescent years may be less likely to suffer from depression later in life. These findings were especially prominent in women.</p><p>This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. This data asks students to select up to 5 male and 5 female friends and indicate how often they felt depressive symptoms. </p><p>MSU Sociology Assistant Professor Molly Copeland and lead author Christina Kamis (Sociology doctoral candidate at Duke University) published the study in the Journal of Health and Social Behavior in September. </p><p><strong>Female teenagers may struggle more with depression during their teen years but show fewer depressive symptoms later in life.</strong> </p><p>For female adolescents, popularity can lead to increased depression during their teen years. However, this ultimately may lead to lasting benefits of fewer depressive symptoms later in life. "Adolescence (is) a sensitive period of early life when structural facets of social relationships can have lasting mental health consequences," Copeland wrote, adding that "compared to boys, girls face additional risks from how others view their social position in adolescence."</p><p>Throughout this study, men showed no association between popularity and depressive symptoms, however, they did show benefits from naming more friends. As for why this is, Copeland has a theory: perhaps the expectations on young girls (compared to young boys) as well as the roles that lead to popularity can create a kind of stress and strain felt more prominently by girls than boys. </p><p>While this does create more difficult teen years for young girls, the stress and strain may lead to giving these girls a psychological skillset that benefits them later in life, allowing them to deal with stressful situations more easily.</p><p>The study also suggested that teenagers who have a smaller social circle showed higher rates of depression later on in life. </p><p><strong>Results from both men and women followed a U-shaped trajectory of depressive symptoms.</strong></p><p>The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s. This was particularly more noticeable in women, who showed a steeper decline in symptoms between the ages of 18-26, followed by a more rapid increase in symptoms in their early 30s. </p>
How to stay social while battling depression<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MjA3MC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxNDMyNDY1N30.e1ULIJ5QYXh4H1SGUPUTJqYBCnX2XWp6InjPRr-2Bdw/img.jpg?width=1245&coordinates=0%2C22%2C0%2C22&height=700" id="832fd" class="rm-shortcode" data-rm-shortcode-id="b360bb24fb8d6025680bfffb52fd5982" data-rm-shortcode-name="rebelmouse-image" alt="depression support group illustration" />
Attending support groups, planning activities with family or even just a weekly phone call to a friend can help alleviate depression.
Credit: Mascha Tace/Shutterstock<p>Although maintaining relationships can help you cope, it can also be one of the most difficult things to do when you're experiencing depression.</p><p>As Dr. Jennifer L. Payne (an assistant professor/co-director of the Women's Mood Disorders Center at Johns Hopkins Hospital in Baltimore) <a href="https://www.everydayhealth.com/hs/major-depression/staying-socially-active-with-depression/" target="_blank" rel="noopener noreferrer">tells Everyday Health</a>: "One of the common symptoms of depression is social isolation." </p><p>Payne goes on to explain that you can "soak up some energy" by simply being around other people, moving around, and staying active.</p><p><strong>Creating a daily schedule and planning activities ensures action. </strong></p><p>While it may be easy to turn down last-minute plans, it's more difficult to cancel plans you've already committed to with friends and family. While it's important not to overwhelm yourself with a packed schedule, creating a minimal daily schedule that involves seeing friends and family or doing activities that you've previously enjoyed can ensure you stay active and often makes you feel more accomplished at the end of each day. </p><p><strong>Support groups and social networking with people who understand. </strong></p><p>While depression can very easily make you feel isolated and alone, surrounding yourself with others who may be struggling with depression as well can help in multiple ways. You will have peer support from people who relate to how you're feeling plus the added benefit of being around people, which can raise your spirits. </p><p><strong>Keeping a journal (and setting goals) can help you feel accomplished. </strong></p><p>Keep a thought journal and detail certain daily or weekly goals (such as a plan to call a friend on Monday or to visit your local coffee shop for a change of scenery on Thursday). These small, achievable goals not only get you out of the house and/or interacting with others, but they also provide a sense of accomplishment and satisfaction once they are complete. </p><p><strong>Random acts of kindness, such as volunteering, will make you feel good. </strong></p><p><a href="https://bigthink.com/mind-brain/kindness-benefits-james-doty?utm_term=Autofeed&utm_medium=Social&utm_source=Twitter#Echobox=1596517476" target="_self">Being kind is good for your health</a> in many different ways. Doing something nice for others can boost your serotonin levels. Serotonin is a neurotransmitter that is responsible for feelings of satisfaction and well-being. Similar to exercise, kindness, and altruism can also release endorphins, creating a <a href="https://www.quietrev.com/6-science-backed-ways-being-kind-is-good-for-your-health/#:~:text=Kindness%20releases%20feel%2Dgood%20hormones&text=Doing%20nice%20things%20for%20others,as%20a%20%E2%80%9Chelper's%20high.%E2%80%9D" target="_blank" rel="noopener noreferrer">temporary sense of euphoria</a> that can help combat depressive symptoms. </p>
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