Abuse of the Bail Out

By Contributor Archive

Filed Under General on Nov 12 

I was in favor of the $700 billion bail out. It was a bail out for the economy, not the fat cats on Wall Street, and was necessary to get the credit markets moving. However, the bail out and the funds from the economic stimulus package are being abused to support lobbyists and big donors rather than to stabilize our financial markets.

On Monday, American Express received approval to transform itself into a bank holding company. By definition, a bank holding company is any corporation that controls one or more banks. Since when are credit cards and travel services considered banking? The bottom line is that they don’t offer loans, which is exactly what our economy needs to start moving again. From what I can tell, no one knew about the deal until it was done. I would like to know who is responsible and then they should be fired.

The RePO (Reid-Pelosi-Obama) team is calling for emergency financial assistance for the auto industry. The auto industry is a significant piece of our economy and some support should be given, at least to the lending arm of the industry, but only with the right provisions. Obama’s team is pushing on three issues. First, they want to accelerate access to the $25B in Energy Department loans that were meant to develop more fuel-efficient cars. Second, they want to give them access to the $700 bail out fund. Third, they want to give them emergency loans from the Federal Reserve.

Detroit auto makers have been in trouble for some time now. They were in trouble before the credit markets shut down and they were in trouble before gas prices sky rocketed and people quit buying SUVs. All the while foreign auto makers like Toyota and Honda, both of which have major plants in the US, were doing well. That tells me that they have fundamental problems within their companies. Throwing billions of dollars at it may temporarily put a band aid on their problems, but the cash will run out eventually and they’ll be right back in this situation.

As for the $25 billion that they’ve been given, it’s for development of more fuel-efficient cars. That’s putting the cart before the horse. Although fuel efficient cars are the future of the industry, they have immediate problems they need to focus on and fix first. One of the most important of which are unions. Unions are inefficient, expensive, and the political driver behind the bail out of the auto industry. Democrats bow down to unions because they are one of their biggest supporters. Personally, I don’t believe that’s a good reason to funnel billions of dollars to Detroit.

After giving them access to the bail out funds and Energy Department loans, RePO wants to give them access the Federal Reserve loans. Why don’t we just write them a blank check? That way RePO never has to worry about the unions not supporting Democrats.

Now we’re going to insure $139 billion in debt for GE Capital. At least they’re actually a bank holding company and own a savings bank.

This economic crisis is unprecedented and no one knows what the ‘right’ solution is, but for once can we take politics out of it and do what’s best for our country? Then again, maybe that’s too much to ask of most politicians.

Comments

  • Troy La Mana

    How else can the Democrats get businesses on the government teat like they got the voters if they don’t keep giving “bail outs”?

  • taturner

    If the government keeps bailing out, they must be printing new money to do it, right? Isn’t that what is causing the problem? The dollar has less value, so we need more of them to make them do anything for us.

    I remember as a kid I thought simply that if we needed more money that it could just be printed. It seems so simple. Print more money, and there should be plenty of it in the system. But now I realize the fallacy of that idea.

    • JE

      You are ahead of your elected officials on that one.

    • Alaina

      The underlying cause of this particular crisis goes back to ’94 with the deregulation of sub-prime loans.

      Uncreditworthy people were getting loans for homes they couldn’t afford and therefore defaulting on those loans. Wall Street and other companies, such as AMEX, started trading on mortgage-backed securities and other debt and used themselves as leverage. Then when the bubble burst, they all lost billions and have had to write it off.

      Now the banks don’t trust each other and the credit markets are frozen, which will bring an economy to a screeching halt.

      There are lots of issues, but I think the first focus should be to get the credit markets moving again.

  • East of Eden

    I don’t know why any of us are surprised that King Hank changed his mind about how the bailout funds were going to be used??!! I just rolled my eyes during the press conference, then changed the station….I just couldn’t take it anymore. There was really never a good “plan” in place, the $700B was an arbitrary number, and to top it off, it was all illegal in the first place…

    As for the Auto makers, let them fail, or reorganzie in bankruptcy. That is the only way they will get the union monkey off their backs — we know, and it has been mentioned that other auto makers are doing just fine, even in the bad economy. I agree, unions have served their purpous. With the new card check legislation they will only serve to further hinder the ablity of US business to grow and be competitive. The unions are not in it for the working man, they are just like any other political, or special interest group, in it for the power and for themselves.

  • Alaina

    LOL

    Its pretty well known in our family that we don’t agree on anything… Ever.

  • JE

    My problem with the 700 billion bailout is it won’t work.
    The economy is cyclical. Government cannot stop a down economy. They can, however, make it worse but trying to fix things they do not understand. The recession should have happened years ago but instead of letting a bubble burst, our all knowing government kept artificially lowering interest rates to try to keep things going. Now instead of a mild recession after a bubble we are going to deal with a massive recession as we readjust to the bursting of multiple bubbles. Just like social security, medicare and all the other government savior programs, there is a reconing day. All bills come due eventually. Perhaps that old mantra of passing our debt to our children is finally playing out. BOTH PARTIES ARE TO BLAME.

  • George

    Why bail out people who got themselves into trouble in the first place? That is rewarding their behaviour….

    The problem in the US right now is that no one is in charge at the moment, or at least seems to be in charge. No clear policy, no set course.

    Is it me or is it getting more foggy?!

    • JE

      Yeah, it’s getting more ‘foggy’. But take a whiff and you will notice the smell is not fog. It’s the stench of the steaming pile that is our current government. (Both parties for many years)

  • WilliamK

    You forget the wonderful news that after the bail out, many of the banks handed out dividends with that money.Citigroup got $25 billion and is handing out $3.5 billion in dividends. BoA got $25 b and is giving out $6.5 b, JP Morgan $25 b, handing out $5.6b. and the list goes on.

    Why are they using the money to pay dividends? Why not keep those billions on hand to loan out? Oh, it is not a problem, they will just get more money from the government when they run low again.

    Giving tax money to any business, even if you get stock (nationalize) in return, only prolongs the day of reckoning. These badly run businesses need to fail and get out of the way.

    • Troy La Mana

      At least if they give dividends then some of the money will go to people who will really use it to spur the economy.

  • Troy La Mana

    Unions in the 30′s and 40′s had a purpose. Now they just bring down the auto industry. Plants in the South that are in non-union areas are making profits.. you know.. Toyota and Honda.

  • congoboy

    My dear Alaina,

    You neglect to mention that the Obama team intends to require substantial meaninful movement toward high CAFE requirements and the rapid development of electric-powered cars to be developed symbiotically with Obama’s plans for a national electric grid.

    As for unions, without them there would be no minimum wage, no work safety standards, no maternity leave, no child labor laws. Unions provide some equal bargaining power to those employed by huge corporations. I have been, am, and will continue to be a fan of unions.

    I also don’t understand why you don’t talk more about the complete abdication of moral authority by the Bush administration and the Republicans in general when it comes to a serious energy policy for this country. As well as their silly faith in an unregulated free market system, which has nearly brought this country to its knees. The simple reason, unchecked capitalism breeds unchecked greed which throws the whole system out of balance.

    In sum, way too much whining and complaining from the losers of this most historic of all American presidential elections. How about giving the guy a year before you start the weeping and wailing.

    One more thing; do I see right that you are a Palin gal? All I can say is, please don’t throw her in that Briar Patch…those of us on the communist left salivate at the prospect of this cute and charming but really uninformed woman as the Republican standardbearer for 2012 and 2016.

    Lovingly,

    Uncle Douglas

    • Alaina

      Obama’s stanards are to make them more green. Exactly how will that improve the management of their business, reduce the bottom line, and increase profits?

      Unions have served their purpose. All the things you named are great, but companies are now required to provide those things. Let me give you an example of how they’re inefficient. One of Dad’s cousins (on the other side of the family) worked for Harrah’s casinos and was part of a union. He got a new computer, but it hadn’t been plugged into the electrical outlet yet so he lost a couple days productivity because he had to wait for the union electrician to come plug it in for him. Otherwise, people would have gotten upset because he would have been taking away a union job by plugging in the computer himself. How can a company function with those kind of inefficiencies? Also, with 3 major car companies in Detroit, without unions, they would still have to pay competitive wages to keep and recruit good workers with the right skill set. For example, if GM paid low wages, then Ford would offer slightly higher wages to recruit some of GM’s employees. Guess who wins in that situation? The employee.

      • Red State Eddio

        Wow, we went from Political Derby to Family Feud. I’m gonna step back on this and let you two debate this one. ;-)

    • Shawn Naegle

      Dear Uncle Douglas,

      Wow, you are right, the unions have done a great job making the Big 3 automakers in the USA competitive. GM, Ford, and Chrysler are doing great! I mean what company wouldn’t thrive when they have to pay 4 times more for labor than their competitors? Everyone knows that an un-educated assembly line worker deserves to be paid $100K+ per year because ONLY a union worker can perform that labor. It’s not like anyone with a GED who dropped out of high school could do that kind of work, right?

      Take the average UAW forklift operator making $103K. According to the Bureau of Labor Statistics the average non-union forklift operator makes $26K. So automakers are forced to pay $77,000.00 more or the equivalent wages of 4 non-union forklift operators. Folks, I’ve operated a forklift – it ain’t that hard.

      Let’s not even bring up what they have to pay for union workers who cut the grass because it might just piss everyone off to know that, yep, they get paid the same union wages as the forklift operators.

      Oh, and let’s also not go into the UAW contract that guarantees 12,000 employee jobs that do absolutely NOTHING. They sit and they get paid. Wow, God bless the unions!!! Drop out of school, join the union and if you’re lucky, you might be one of the chosen 12,000 who gets to do NOTHING and still make 6 figures!!!

      And we wonder why US auto makers can’t compete?

      When the Big 3 die, what are we going to do with all of the un-educated, un-employed union workers who will be out of their 6 figure jobs? Will they be willing to go to work at Wal-Mart for $10 an hour? Or will they get the government to pass laws that favor unions so that they can force Wal-Mart to unionize?

      I can see the next Wal-Mart ad: Wanted night stocking boy, $38 per hour, fully paid medical, Dental, 100% matching 401K, sick leave, vacation pay and if you’re lucky you might get one of the jobs we have to carry where you do nothing all night long and still get paid!

      Welcome back K-Mart, Wal-Mart is about to die!

      • Red State Eddio

        I love it when you rant about financial matters. Good stuff.

  • kristen

    Why don’t we just bail out the whole country? I could never get behind the bailout because of stuff like this. I mean, when does it stop?

    I agree about the unions. They need to go away. I’m one of the few at my job who refuses to join. I give them an earful every time they come around and ask me to sign up.