Posted 11/28/08 (By Travis)
11/28/08 Neoperspectives.com
U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
11/20/08 Bloomberg.com
Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.
There are plenty of negatives regarding this bailout without this surprising, or should it be surprising?, disclosure that taxpayers won't even know who we are funding and how much institutions are getting. The main negative, in my mind, is that the banking industry will effectively cease to function as a viable and efficient sector of the economy. Government subjective bailouts will destroy competition amongst banking business models, reward risky and suboptimal loaning patterns (also encouraged by government regulations), and excessive executive bonuses, and punish the prudent banks, who would otherwise survive and buy up and improve the assets of the bankrupt banks at reduced price. 'Creative destruction' would seem a worthwhile alternative.
Then, of course, there is always the sheer cost. Given the great debate and fallout, much of it negative, over the recent $700 billion 'stimulus bill' passed by our elected officials, we now learn that the government, the unelected fed, has spent over 10 times that amount without any public debate at all. This kind of spending, in addition to the health and retirement spending and guarantees already in place, is simply not sustainable and, if continued, will eventually bankrupt the country. With every industry now clamoring for bailouts, and especially the big spending high taxing cities and states like New York, the last domino to fall will be the Federal Government, which will only be able to bail itself out by printing money.
Paulson told the House Financial Services Committee Nov. 18 that the $250 billion already allocated to banks through the TARP is an investment, not an expenditure“. I think it would be extraordinarily unusual if the government did not get that money back and more,” Paulson said.
If such an outcome was really ensured wouldn't the private market ante up the same loan for a tidy profit?
The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.
So, it would appear there is a great deal of overhead somewhere. This reminds me of a Katrina story, aspects of which were previously posted:
The Big Easy’s Billion Dollar Boondoggle
8/29/07 NRO
Perhaps all this money should’ve been directly deposited in the bank accounts of the 300,000 people living in New Orleans. All divvied up, that $127 billion would come to $425,000 per person! After thanking Uncle Sam for their sudden windfall, residents could head to Southern California and buy homes that are now on sale thanks to the sub-prime mortgage crisis and bid up the sagging house prices in the state.
So why does government spend so much on these crises? Why do they not just give the enormous amounts of money spent strait to the affected people as a stimulus check? One possible reason is that it is simply too easy of a solution. Why do we need the 'qualified' folks at the Fed or FEMA if the people themselves could more efficiently spend the money being spent on their behalf? There is, perhaps, a sort of subconscious arrogance on behalf of officials in government fueling a belief that their tailored spending designs generate the most common good. After all, this is the explicit purpose of their positions and the accumulation of years of experience and training. This is reflective more of human nature than any sort of malevolent process, no different from the surgeon who over-operates or the doctor who over-prescribes. The doctors see a patient who is ailing and they want to help, they want to have confidence in their abilities, confidence in modern medicine, and confidence in their years of training. So, in a sense, harm which is occasionally caused patients due to over-medical management stems from a combination of misplaced over-empathy and aggressive self esteem. There is no reason to suspect government officials are immune from the same malady.
Another consideration, more insidious, is the benefit government accrues from such massive accumulation of power. $7.7 trillion is such an egregious sum, the potential for corruption in the fight for these dollars will be unprecedented and thus the quo quid quo benefits for politicians and unelected officials will be equally enticing.
In fact, the worst aspect of these bailouts may be the immorality injected into society and economy by the aforementioned corruption, perceived or otherwise, and the subjective nature by which the banking and financial industry are maligned. Imagine if you are the CEO of a successful baking or investment firm. You have spent your whole life invested in the growth and success of your company and then to see rivals receive billions of dollars in free government money? Would this not take the passion, the work ethic, out of your job, shaking your very spirit? Would these frustrations at such unfairness percolate through the ranks and home into the families.
This damage that government unleashes on the psyche, the zeitgeist, of the American people, is proportionate to the degree of involvement in the economy and something which cannot be assigned an quantitative monetary value.
4/8/10
CEOs of bailed-out regional banks get raises
4/5/10 Reuters
Bear in mind both Republican and Democrat presidents and politicians on all sides of the aisle voted for these bailouts resulting in the corruption and stagnation of our statist financial system.
8/11/10
NYT 7/29/10
For starters, G.M.’s vision turned into a car that costs $41,000 before
relevant tax breaks ... but after billions of
dollars of government loans and grants for the Volt’s development and
production.
Quantifying just how much taxpayer money will have been wasted on the hastily
developed Volt is no easy feat. Start with the $50 billion bailout (without
which none of this would have been necessary), add $240 million in Energy
Department grants doled out to G.M. last summer, $150 million in federal money
to the Volt’s Korean battery supplier, up to $1.5 billion in tax breaks for
purchasers and other consumer incentives, and some significant portion of the
$14 billion loan G.M. got in 2008 for “retooling” its plants, and you’ve got
some idea of how much taxpayer cash is built into every Volt.
In the end, making the bailout work — whatever the cost — is the only good
reason for buying a Volt.