Politics: Bailout demonstrates bad priorities
Here in Peoria, we often discuss the cost of various of various projects in terms of how many feet of sidewalks it would buy, or how many police or firefighter salaries is would cover.
Blogger Jeff Jarvis looked at the (minumum) $700 million billion financial company buyout and made an informal list of some of the things the United States could have bought instead with that money. His list:
- Give 3.5 billion One Laptop Per Child machines for every Muslim child and every child in China
- Free broadband access for every American for 20 years, or take $5 to $14 billion and build a nationwide WiMAX network.
- Free private college educations for 4.4 million people, or free public school educations for 26 milllion people.
- Triple America’s research and development spending.
All these these would make America vastly more competitive, or would improve the world’s understanding of us, and improve the business environment. Instead, we are going to be uncompetitive by rewarding companies that make bad business decisions.
We’ve spent decades behaving like crackheads. And the government’s solution is more crack.
September 21st, 2008 at 2:06 pm
I have as much disdain for the idiots who got us into this mess (both in business and government) as the next person. But I think the bailout is money better spent than the war in Iraq, which, last time I checked, was just about in the same ball park as far as treasure depleted.
Also, Bill, it pains me deeply to be an apologist for rich people in general — and rich Republicans in particular. So quit posting stuff that causes me to do this!
September 21st, 2008 at 3:19 pm
How have companies been rewarded? Publicly traded companies are owned by shareholders who have had the value of their stake decimated. Some reward.
September 21st, 2008 at 7:49 pm
The cost of the Iraq was in now over $580 BILLion dollars, or to put it another way: 580,000 million. To put it yet another way, that’s enough to pay for Mr. Jarvis’ little list 828 times. Let me repeat that slower, so everyone can take more time to read it…eight…hundred…and…twenty…eight…times.
I’m not real happy with the bailout, either, but holy shit, can you NOT see the ridiculousness trying to put the bailout into “perspective” without admitting the stupidity and waste of the Iraq “war”? The one that should have never started to begin with? Yeah, that one.
September 21st, 2008 at 8:41 pm
Actually BJ, Billy made a typo. The bail out is $700 billion not million. So you could get about 2/3 of his list with the Iraq War.
September 21st, 2008 at 8:52 pm
So in reality that does the opposite of what you intended and puts the focus back on the economic bail out since it will cost more than a 5 year long war. It really is a massive undertaking and quite frankly I think it completely misses the point. We’re going to give $700 billion to banks who made bad investments and leave the homeowners, who will bear the brunt of this deal, out in the cold. Let the companies fail, otherwise we’re setting a precedent for future economic problems.
September 21st, 2008 at 9:17 pm
When financial institutions are urged to make an effort in extending credit to non creditworthy clients what is the result down the road? The CRA of 1977 passed by Congress and signed by the sitting President was the first step toward our current situation. Bad loans made with good intentions are still going to fail if the client do no have adequate streams of revenue.
ACORN was a big advocate of this type of program and had some linkage to a certain community organizer in Chicago who got a law suit decided in the Acorn’s favor which meant a continuation of bad loans to questionable applicants.
The reasonbanks made the loans is that were evaluated by agovt agency and one of the criteria was minority loan contracts. They were not forced to make questionable loans but if they did not the agency might not give look favorably on bank expansion. Clearly a carrot and stick routine.
September 21st, 2008 at 9:43 pm
PC, I don’t think that is a valid comparison. The big lenders weren’t urged to make loans to non-creditworthy individuals by the govt, they did so willingly like drunken sailors.
Sorry, I would be the first to attack Obama if he was related to this. But he’s not in the least bit, its greedy CEOs and regulators turning a blind eye.
September 21st, 2008 at 11:46 pm
11 Bravo said: “So in reality that does the opposite of what you intended and puts the focus back on the economic bail out since it will cost more than a 5 year long war. It really is a massive undertaking and quite frankly I think it completely misses the point. We’re going to give $700 billion to banks who made bad investments and leave the homeowners, who will bear the brunt of this deal, out in the cold.”
The Iraq war isn’t over yet. Also, it’s more than likely the bailout won’t cost the government as much as it’s on the hook for. All those loans aren’t bad, and it appears Uncle Sam will get them on very advantageous terms. Remember, if these loans were good, they’d be assets, not liabilities. The problem is trying to figure out how many are good and how many are bad. That’s the crux of the mess we’re in the middle of.
The Democrats will try to get something for homeowners in the final bill. I don’t know if they’ll succeed.
If the financial system were allowed to collapse, NO ONE would be able to get a mortgage loan or car loan or college loan. This cure is NOT worse than the disease. Yes, it would be satisfying to just let all the greedy morons turn into street people. But most of them already have 1,000 times more money than any of us will ever see. No, it’s not fair.
September 22nd, 2008 at 1:20 am
anotherexjser, your point would be valid if we were talking about the entire financial system. We’re not, yes there are some big names on the list of near-failures but the entirety of the US banking system is not in the same boat.
This is evident by the fact that a number of failing companies like Lehman and Merrill Lynch have been either pieced out or sold in their entirety to banks in a better financial position. Other banks with the resources would buy up the contracts on the good loans from failing banks, and likely at a nice profit for the purchasing bank.
People just need to let the economy work itself out. Meddling with it is only going to hurt us in the long run.
September 22nd, 2008 at 2:22 am
I don’t agree with your premise that the entire financial system is not on the line, 11Bravo. I don’t think anyone knows for sure.
We might be OK if everyone were allowed to get what they deserve. But how far the dominoes would fall is, at best, an educated guess. Time will tell if intervention was the right approach. We can have this debate again in five years.
Paulson and Co. did what they thought they had to do. I don’t really like Paulson, either. I haven’t voted for a Republican presidential candidate since 1976. Paulson was chairman of Goldman Sachs and has close ties to Chinese big wigs. He’s done most of the heavy lifting in this crisis, though, so I have some grudging admiration. I thank God that this manifestly incompetent administration had a competent person at the Treasury rudder when the spit hit the fan.
September 22nd, 2008 at 3:08 am
Correction: Paulson was CEO of Goldman, not chairman.
September 22nd, 2008 at 6:24 am
Without the actions taken by the feds, credit of any kind was rapidly drying up as banks were not just raising their lending standards but also forced to cling to all available capital in an attempt to survive the massive deleveraging. Even partisan democrats have supported the feds’ actions, acknowledging they were shocked to learn of the dire consequences that inaction would bring. This was not as simple as “so what, let a couple of companies fail.” Without the lubrication of credit, the gears of the economy were seizing up quickly.
As to the value of the assets purchased or backed, they were acquired cheaply partly because of the difficulty of accurate valuation, but more so because the demand for them vanished. I feel pretty good that most of the assets will perform. All the media hype notwithstanding, the foreclosure rate in August was just one in every 416 households. I feel even better about loaning AIG $85 billion at 11.5%. That money costs us 3.5%, it is backed by all company assets, and we are the first-in-line creditor.
Argue all you will about who is to blame for this mess, but I believe history will cast Paulson and Bernanke as heroes.
September 22nd, 2008 at 9:08 am
Please check out these links for more on the crisis and the Obama influence in the Acorn debacle,also the background of Fannie Mae Freddie Mac and how they were nudged by the Administration in the 90’s
http://noquarterusa.net/blog/2008/08/15/obama-acorn-citizens-services-inc-false-fec-filings/
http://article.nationalreview.com/?q=NDZiMjkwMDczZWI5ODdjOWYxZTIzZGIyNzEyMjE0ODI=
http://www.city-journal.org/html/13_2_acorns_nutty_regime.html
http://articles.latimes.com/1999/may/31/news/mn-42807
http://www.foxnews.com/story/0,2933,424945,00.htm
September 22nd, 2008 at 9:34 am
It’s a close call as to whether the gov’t should be bailing out these bankrupt institutions. This crisis has shown that the US financial system is all about one word – confidence. The goal of the bailout is, as it is being sold on the Sunday morning talk circuit, to prevent further loss of confidence. If that is true – then I suppose we have to bite the bullet and let it go through. But we need to learn a huge lessen from this mess – we need greater government regulation of business. With the federal government buying up these bad loans and otherwise infusing capital into this mess, at least the government will now be able to prevent this kind of thing from happening in the future. Hasn’t anyone noticed that any business that gets deregulated ends up getting destroyed: S&L, airlines, trucking, energy (remember the Enron debacle started with the de-regulation power distribution in California), local radio (try to get any local content on local radio) and now mortgages and the so-called secondary mortgage market; even loansharking has been deregulated – now we have “payday loan” shops charging 500% interest on every block. The lessen is clear – protecting the public good is a legitimate and necessary function of government.
September 22nd, 2008 at 12:04 pm
11B – thanks for the correction…I should have known, but I read what I read.
Billy – thanks for the edit. Go ahead and take down my post, it’s nonsense now.
dd – I agree with most of what you just said right there, but there is STILL local radio out there, you just have to go to small towns to find it! In Canton, our AM has a local morning show, a local news man (only one Peoria radio company – JMP – has a dedicated news person(s) anymore, and they are on WMBD for the most part), we do local ag market reports and local stock market reports, cover high school sports, give local weather constantly, and have created yet another local show called “Books on Radio”, where local residents come in and read classic novels, just like the Golden Age of radio. Also, just this past Saturday, we broadcast the Canton Friendship Festival parade in it’s entirety, and I got an email from Texas this morning (from a former Cantonian) thanking us for the webstream, he listened to the whole thing. Kinda cool.
But I would agree with you overall, as MOST local radio has been destroyed by corporate greed over the past 10-12 years. I honestly think it will turn around and go the other way in a few years from now, but until then, know that there are still some of us involved in smaller companies in smaller communities that still “give a crap” about providing local radio.