Bailout, Schmailout 21 comments
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In any loan, the lender demands to know the use of proceeds. It is beginning to appear that we, the people, aren’t getting even that from the use of our money in the bailout.
The Times’ editorial yesterday morning complained that banks may use the bailout funds to buy other banks. NPR’s Planet Money last week reported on fine print that would allow the banks to use the funds to pay dividends to shareholders (there’s some Talmudic debate on that) or buy back stock, only enriching the owners. I heard on local New York TV yesterday — for what it’s worth — that the bailout means “good news” for Wall Street employees: higher bonuses. The strictures being put on banks are merely lipstick-on-pig limitations on executive pay. BFD. They should be explicit requirements on the use of funds.
As Planet Money’s Adam Davidson said, my blood is boiling.
Now we have General Motors (GM) trying to remake itself into a bank to get a piece of the bailout bonanza.
First, our money should be used to shore up credit and confidence and we should be demanding that be made a condition of getting a penny.
Second, if you want to bail out GM and other companies, I’ll give you a new idea: Take over their health insurance obligations.
If you’re going to socialize something, don’t let it be the banks. Let it be the common good of health care. Take over health insurance and make it universal.
How will we pay for it? Taxes, of course. But won’t that put GM back in the hole? No, because it has no profit to tax. You want to redistribute wealth, then this will have the profitable paying for health care and it will take a huge and looming burden off the big, old giants, giving them a chance — one last chance — to get their acts together.
Making health care portable and universal will also, I predict, release a flood of resignations as people no longer feel trapped by their jobs because it is the only way to get coverage. This can lead, in turn, to new efficiencies in companies and a wave of entrepreneurialism (and with it, innovation, wealth creation, and new tax revenue). Let’s try trickling up.
And if we’re going to use federal funds to try to improve the economy, I say we should be using it to provide universal broadband internet access better than anyone in the world: our new interstate. It will lead to more new companies, new jobs, new skills, better government, more competitiveness on the world market, and better education.
And while I’m playing New York Times columnist, giving my prescription for the nation as if I were running it, I’d take advantage of low oil prices by putting a tax on fuel that guarantees a minimum price to both keep demand low and, far more important, to fund immediate and for-once-real development of — and tax credits for — alternative energy, which will also create jobs and make us competitive in the world market.
The tragedy of the bailout is that we could end up using this tremendous resource and get nothing for it.
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This article has 21 comments:
Yeah, right. That will be an efficient use of the money, just like the Post Office is.
You do realize that everyone over 65 already HAS universal health care (Medicare) and that it's losing so much money that the predicted date of financial collapse keeps getting closer and closer. But hey, the gub'mint solution to every ponzi scheme is to make it bigger so why not?
If you truly want to ruin health care in the US then by all means nationalize it. Everyone will have the same access to nothing.
Note to author: The gub'mint is the driving source of these financial problems, not the solution. While you are correct to claim putting the bailout money into saving banks is in error, you are mistaken to think that putting it into universal health care will turn out any better.
The strongest arguments I hear against this are 1) Corruption and 2) Incompetence.
I would argue that we trust judges to make very important decisions, life and death stuff. They are carefully selected, they serve long terms. If they are corrupt or incompetent then they go to jail or are removed.
Money should be seen in the same light. This strong sense that government cannot be trusted to issue money, and instead must borrow it from private central banks is a terrible trap. It is a trap because it is only true as long as so many people believe it.
The only governments that will ever be free of debt are the governments that do not have private central banks.
Those with private central banks will sink forever deeper into debt. Then the interest payments on this debt will consume an ever growing portion of the work product.
However, by loaning money to the central bank, the tables would be turned in an instant.
I have always said that there is enough money being wasted in the current health insurances alone to pay for at least a national catastrophic health plan and probably to pay for a single payer health insurance why do we need an insurance agent between us and having health care?
If we're honest, health insurance is a natural monopoly, just like utilities. And, just like utilities, free markets lead to abuse of the weakest party - the customer.
Getting even further away by nationalizing private business will ultimately make things worse, not better. We need to be stripping away all these never-intended functions of government, not adding to them. I can't believe all these cries I keep hearing, from both sides, of "give the government more power!"
Where is the outrage the left showed over the increased power of the government through the Patriot Act? You ain't seen nothing yet. Giving over our businesses and our banks and our health care, now THAT's giving the gov't real power -- because money is power in today's world. We are creating a monster that will devour our every last freedom.
We need a real revolution. Not an Obama or McCain "business as usual" revolution. Vote all the bums out.
Any company without direct competition should be able to make money. I once heard a USPS leader state that they needed to raise the cost of stamps (prices) because of the decrease in demand due to electronic commerce.
Only in the USPS and in gub'mint are the laws of economics suspended and reduced demand can result in higher prices. Unbelievable.
1) Preconditions of TARP provide that there must be transparancy and timely reporting on transactions. Check.
2) There was an interesting exchange recorded in Congress' minutes between Barney Frank and the House Speaker re: the securities eligible for purchase under TARP. At outset, bank assets (particularly battered CMOs/MBSs) were the targeted impetuses, but Frank asked for a specific definition of "assets" under TARP, to which inquiry he was answered 'assets or any other security deemed necessary.' It's in the minutes, and it was included in so many words upon the bill. Hence, we soon saw TARP purchasing Preferred shares (i.e. bank liabilities) of banks.
3) This all is hardly nationalization/social... although it could evolve into such.
a. TARP is taking on preferred shares--assets on its own balance sheet. These are investments with appreciable/depreciabl... capacity that're being financed in the ST by raising the national debt ceiling. If these investments depreciate severely, the Treasury may have to monetize that debt by printing money & raising taxes. That would be socializing this all, but we'd be f'd no matter what anyway.
b. Further, stakes in banks obtained thru preferred shares offer no controlling interest in issuing firms, so I don't see the socialist argument.
4. The problem in credit markets is not capital availability, but fear of counterparty risk. Frankly, most banks are adaquately capitalized with huge reserve ratios, but lack of balance sheet transparancy in the wake of LEH/mark-to-market/CDS issues makes it hard for one bank to trust another. TARP aims to provide excessive amounts of Tier 1 as a clear signal, "these guys are solvent." That rekindles the interbank market, which allegedly trickles down to prevent the nation (consumers and banks) from sitting on credit and forgoing investment due to fear. Thus, banks may use the funds as they wish--maybe employee bonuses--but I still see job cuts, an inproved interbank market.
Finally, applying the $350b/$700b instead to socialize health care would be in complete ignorance of the national [global] economic status & its origins.
However, they aren't really socializing it, they are just transferring $ into their own pockets and calling it a bailout. If it was socialization the government would actually own something. In this case the public gets bunk. The public is too dense to notice they are getting scammed and too powerless to do anything about it.
Stop the giveaways. Throw out Paulson and his Goldman cronies.
In what way is our government "beholden to the people?"
Congressman were deluged with calls, letters and e-mails from constituents who wanted a "No" vote and they still voted "Yes" the second time around.
And how do all of these nationalization ideas make government more accountable to those it allegedly represents?
Maybe we can all be fitted with shackles in the next round of bailouts.
Balance the interests of these workers (and of their employers in an efficient labor market) with those of the lenders and security holders by amending the bankruptcy code to allow insolvent people living in their homes to get loan mods in bankruptcy.
Lenders are not the only members of the business class.
Case-by-case adjudication and settlements from the bottom up would ripple thru the system and help correct the current structural barriers that are hindering loan mods in tens of thousands of cases where - - but for the financial interests servicers and their law firms have in properties going to foreclosure vs. work-outs - - mods are in the financial interests of the lenders.
Not to mention how destructive to communities are the walk-aways, short-sales, deeds-in-lieu, foreclosures, cash-for-keys, and evictions...
To Assume Benevolence Is Foolish !!!
When You Centralize Power You Limit/Eliminate Recourse.
To get an understanding of what socilized/single-payer health care will look like one only has to view the VA hospital system. Oh, the stories I could tell you from personal experience. There is enough in the recent news to give you a good indication.
Slavery has many forms that do not involve shackles.
Treat The Disease Not The Symptoms !!!