What Do the Bailouts Really Mean for America?

As the economy positions itself for a recovery, and the bailouts continue, the question must be asked if the government has spent too much.

As a result of the market meltdown, Americans from all walks of life have lined up alongside big business waiting their piece of the bailout pie; and the Federal Government has answered just about every call.

Unfortunately, the very tactics intended to lead the United States out of this deep and dark recession are consequently the same tactics that got the country into this mess in the first place – an over-abundance of spending.

George W. Bush has reaped much of the blame for the economic crisis by the mainstream media, but by no means should responsibility fall solely on him. Bill Clinton has been widely criticized for deregulating the banks during his administration, and the list of those responsible could go on and on.

However, the real blame lies with all of those who are now lining up for federal bailouts. Most notably, the banking and auto industries and the homeowners who bit off more than they could chew.

Start with the American auto industry; born on the strong ambition and vision of Henry Ford and later expanded to include General Motors (GM) and Chrysler. Today the ambition of old has been replaced with the ignorance of new, as the CEOs of the Big Three continued to build vehicles that no one bought. Then, as dealership lots were packed full with last year's model and the industry broke, they looked to the federal government while claiming that the auto industry was too big to fail.

The truth is, however, they are not too big to fail. With the Chrysler bankruptcy underway and GM's soon to follow, unemployment will spike as dealerships close and workers are laid off. However, this restructuring is much needed; if it wasn't, the auto industry would still be thriving.

If any of the Big Three were to close shop, on the other hand, Toyota (TM), Honda (HMC) and Hyundai (HYMLF.PK), are ready to move in with their assortment of fuel efficient vehicles that consumers want. Not to mention Ford (F), still standing without having taken a dime of bailout money. The initial shock of these bankruptcies will hurt, but they're long overdue.

The big question is, in my opinion, why did the government wait so long before forcing these companies into bankruptcy? The answer is, most probably, to give the UAW time to finagle the best deal possible for themselves. How the Feds allowed the UAW to be more protected than the secured bond holders in the Chrysler bankruptcy is criminal, and more evidence that this administration is playing favorites. That's not to say that all Presidential administrations don't play favorites, but it proves that it's just 'more of the same' emanating from Washington.

The UAW also gets an ownership chunk in the company while secured bond holders, under pressure from the Obama Administration, get $.29 on the dollar. Fair? Probably not.

Next in line for the bailout money are the CEOs from the banking industry. Contrary to the auto industry, the banking industry IS too big to fail, and that's why both the Bush and Obama Administrations acted swiftly to save the banks. It has cost the American taxpayer a pretty penny, but the big banks need to survive. According to the government's own stress tests, they will, after raising some additional capital.

At the end of the bailout line stands the American homeowner; those on the verge of foreclosure, and those who feel entitled to government money.

These homeowners fall into two categories.

The first group consists of responsible homeowners that have achieved their slice of the American Dream through hard work and ambition, yet have run into financial hardship as a result of the recession and the mass layoffs that ensued. This group deserves bailout money.

The second group does not. The second group consists of the homeowners that couldn’t afford to buy the homes which they are now ready to foreclose on. These homeowners blindly entered into mortgages under terms that they did not understand, then accepted those terms simply because they were available, not because it made fiscal sense.

Regardless of the fact that the banks were irresponsibly handing out sub prime mortgages, and regardless of the fact that many of the mortgage terms were tricky and misleading, the ultimate responsibility for agreeing to a mortgage lies on the person who affixes his or her signature to the dotted line. This goes back to one of life’s earliest lessons - always read the small print, and if you don't understand the terms, then don't sign.

Unfortunately, lessons of life and a sense of entitlement often clash.

Over the next few years, in an attempt to jumpstart the economy, the United States Government will spend more money than any other Government has spent (in the same amount of time) in the history of the world.

If John F Kennedy were alive today, his famous quotation, “Ask not what you’re Country can do for you, but what you can do for your Country” would need some editing.

No longer is that quote in line with the sense of entitlement that dominates American society today.

The new phrase would simply read, “Ask not what I can do for my Country, just tell me what my government entitlement looks like.”

We already know that California is on the brink of bankruptcy, and that the credit ratings of both the US and UK may receive a downgrade, but the irresponsible spending continues, and so does the irresponsible granting of entitlements.

Every day the Feds are getting more and more involved with the undertakings of private business, as if we should believe that they can do it better. The lifeline of private business is turning a profit, and when is the last time the federal government turned a profit? Or even came close?

A private business would have long ago closed shop if it had the spending record of th federal government.

Additionally, if Washington continues to tell us that it was an overindulgence of spending that got us into this mess, why should we believe that more over-indulgent spending on their part will get us out?

And if it doesn't work, who bails out the US Treasury?

On a closing note, let's stop calling it 'taxpayer money', because we all know that when it leaves our pockets it is no longer taxpayer money- it's the government's money.

'Taxpayer Money' is just a slick play on words that enables taxpayers to feel some sort of ownership for these bailouts, when it's control of private industry that this government wants.

Comments

[Jasper M:]

Pretty good article. But I must dispute the notion that,
"contrary to the auto industry, the banking industry IS too big to fail"
Because, simply stated, pretty much All of it that the current & previous administrations scrambled to save will eventually die. It's just going to take longer this way.

We will end up in the same place, just a different spot on the calendar. And since a real recovery can't happen until we get there, I can't really support that bailout, either.

But good call on the shafting of the Chrysler debt holders. I wouldn't touch a corporate bond now with a ten foot pole.

May 24 02:23 AM

[Dave Wrixon:]

Obama wants to get out of the car industry as soon as he can.

Can you explain why new investors should put money in, when the old investors just got shafted?

May 24 02:51 AM

[Larry M.:]

Same old same old. Big Banking is where this Economic Disaster started with and still resides. Allot of People, Bond Holder and Pensioners are on the Chopping Block because of Corrupt Banking Practices. And the (Idiot Writer) of this Article says they Deserve it ????? Hell Awaits all of you Globalist Job Exporting Evil People and its arms will be Stretched Wide Open to ya !!!

May 24 10:42 AM

[rm:]

[but the big banks need to survive.]

Could someone please explain WHY?

IMO, there has been far too much consolidation in this industry and my feeling is we would be better off dismantling these banks into smaller pieces... although there may be good arguments against my position, I've yet to hear them.

[This group deserves bailout money... The second group does not.]

Yet it's the second group who's getting more assistance than the first, particularly on GSE loans.

[The new phrase would simply read, “Ask not what I can do for my Country, just tell me what my government entitlement looks like.”]

I had been very disgusted with what I thought was an entitlement philosophy of many Americans.

My current thinking is that it's not really entitlement thinking, it's capitulation. SO MUCH MONEY, and so much power flow through Washington, that it's perhaps natural to think that the federal governement is the backstop of the world. "You can't fight city hall" has become more like "You can't fight the White House [or Capitol Hill]."

Any time a dollar moves, a piece of it (often a big piece) goes to federal, state, and in the most egregious form of theft, to local taxes.

The only way left to fight back is to deal in cash. I'm seeing a lot more contractors, businesses, and individuals moving in this direction.

May 24 06:01 PM

[My donkey:]

The author is wrong: Big Banking is NOT too big to fail.

The insolvent big banks should have been temporarily nationalized, split into smaller parts, and re-privatized. Instead, they've gotten bigger via amalgamation and the infusion of billions of taxpayer dollars to ensure the exorbitant bonuses of CEOs and other financial wizards who were responsible for getting us into this mess.

Meanwhile, small businesses go under and families lose their homes. After the bankers buy up these businesses & homes for peanuts, they'll consider lending you (the taxpayer) some of the bailout money you gave them, and charge you interest on your own money

If that isn't fraud, nothing is.

This scheme of privatizing profits and socializing losses is specifically designed to make the rich richer and everyone else poorer. We're heading toward a fascist government controlled by a select few of the richest of the rich. The middle and lower classes won't be able to stop it through revolution because we'll be unable to organize ourselves on a large scale. The power-brokers will set us all fighting against each other, and we'll thin our numbers while they watch in amusement and continue to take our money.

May 24 11:16 PM

[wtp:]

Yeah, almost thought I heard a bit of bias against the working man in favor of the oligarchy here myself. Also, do you mean inflation's NOT primed to be a big tax on everybody's money?

May 25 02:10 PM