I'm going to swim upstream a little and say that I'm not in favor of the bailouts. I'm skeptical about the stimulus package, but I have yet to see the specifics of what they are geared for.
Now, the moment those words have crossed my mouth in at least 3 different conversations I've been amazed at the immediate, passionate response I've gotten from people. Generally this takes the form of, "Oh, you don't understand how many jobs we are talking about being lost.", or sometimes much more condescendingly, "You must be a republican." No, actually, I do know exactly what is on the line, and no, I'm not a republican.
My issue is that the bailouts are bandages, quick fixes, and placebos. There has been an array of reasons floated about why spending $700B plus is a necessity, but bizarrely, none of those reasons has addressed the actual issue: We need to rethink how and why we utilize publicly held corporations. No amount of money thrown at that issue is going to fix anything until we examine that one very simple, albeit difficult, question.
The bailout will alleviate the panic throughout the financial system right now and people will start spending again. So? Panic is an emotion that has been with us as a human race for millennia. It generally seizes us when things are really really scary and by and large the flight reaction, has kept us alive. People should be scared. And until such a time as the underlying system is fixed I see no reason to stop panicing with my life savings. I find this theory akin to icing someone down and sending them back into their burning house to wait out the blaze.
These companies are too big to fail, they'll take down everything else with them. No, they aren't and no, they won't. The sky is not falling, the world is not ending, and life will go on. Nothing is too big to fail. This is the biggest lie of the past 6 months. However, some of these institutions are too big to free fall. Lehman Bros. is a good example. But their isn't an institution out there that couldn't be gently put to rest over a period of months. Instead of propping up failing institutions, the government should be assisting them in a structured sale at reasonable, not firesale, prices.
The workers are the ones who will really get hurt by all this. True, to a degree. But one needs to wonder what could happen in America if instead of layering $700B on top of the companies, we laid that same money on infrastructure contracts, student grants available to the unemployed, small business grants and loans, capital infusions into struggling communities, and any other program to help the worker that got hurt by this? In short, yes, the worker would be the one who gets hurt by this. So help the worker, not the jerks who are using the working man as a shield against the consequences of their own greed and ineptitude.
This is clearly all random musings as the system we have will not allow for common sense to enter the equation. It's much better to play upon the fears of Americans to scrape more tax dollars and national debt into the pockets of the thieves. I expect the eventual accounting of the bailouts to be akin to the Iraq war spending. There's no there, there.
A bailout treats the symptoms. And in truth, I find it irrelevant. I want to know what we are doing to fix the problem. Freddie and Fannie have been nationalized... except I can still go buy stock under the symbols FRE and FNE, only now I know the government has it propped up, it isn't just an implicit nudge-nudge wink-wink. Heck at $0.68 and $0.67 a share they might be good lllloooooonnnnnggggggggg term investments.
Citigroup just Friday split into two entities at the behest of the federal government and with somewhere over $350B in federal backing to execute it. This was lauded as a good thing and a move towards stability. Dig a little and you realize they are separating into the healthy assets and the rotten assets. Guess which one they are shopping for new management for? Clearly the people who got Citigroup into this mess should be the ones to lead the stable healthy banking side of the business. Here is a prediction: Citi Holdings fails within 5 years.
We have the promise of some new legislation, but I want to here from a think-tank. What would prevent something like this from happening again?