Bailout Bill Passes - R.I.P. American Dream
By now you've probably heard the house of representatives has passed the bailout bill and the president had signed it. In spite of overwhelming public opposition, this law will add nearly a trillion dollars in deficit spending to the national budget and will allow unprecedented redistribution of wealth from the public coffers to private banking and businesses interests. All the while there is no guarantee it will prevent a recession.
Dear reader - make no mistake. A little bit of the American dream has just died today.
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5 comments:
I understand that adding a trillion or so to our debt column that we eventually need to pay off is bad for the American dream of financial independence but I don't understand how the alternative of no bailout would not have done the same thing.
You just posted a quote from Rothschild about buying with blood in the streets. With a bailout and the Government buying up homes the taxpayer at least has a chance to benefit from the fallout. Granted, overpaying for homes and lining corporate pockets is not good. But there's a difference between a bad bailout plan and a bad bailout execution. If the treasury buys these mortgages at 40-60% of their face value (not a given but possible) the taxpayer could see a profit on their eventual sale.
However, with no bailout any private entity with cash on hand could buy up these mortgages on their own terms and keep any profit for themselves. Look at Warren Buffet, he's made two enourmous deals already that garner hundreds of millions in short term gains. With no bailout the taxpayer stands to lose out on the this opportunity.
Now granted, like I mentioned before, if the Bush cronies buy at inflated prices and resell and crap prices then we're in trouble. But this is where you and I come in...political pressure to make this bailout a boon for the economy is huge. The government can drive a hard bargin on these loans and essentially extract cash from these companies in the form of writedowns.
It's within our power to make this happen. So by all means be pessimistic about the current administration's ability to profit on this bailout but don't look down on the bailout itself. This catastrophe is our chance profit, you're buying bank stock and the taxpayers just authorized a giant check to buy up similar assets. If you believe you can personally profit from the drop in financials then why can't every taxpayer?
It may not prevent a recession. In fact it is likely not prevent a recession. The panic during last week and two weeks of frozen credit markets have already have already had an effect on economy.
What the bailout may be able to do, however, is prevent a very long and very painful recession, so that instead of a total collapse of a financial system (akin the 30s) we have a short recession.
Chris - Thanks for your comment. I think you are right to make a distinction between the actual plan and the execution of the plan. That is why oversight is so necessary. I just wish I had more faith in the government's ability to negotiate on our behalves. When it has come to things like the prescription legislation, they certainly failed on that account. Let's hope they'll have incentive to do it for political reasons.
Best,
Miel
Kitty - Yes, we do hope in the end that the bailout will do its job. I think you are right in that a lot of the damage has been done. This is both in actuality, but also in the pysche of the American people. The trust is gone, and that's where a prolonged recession is more likely.
Best,
Miel
James,
Your post is so true. I have never been more disgusted with a legislative bill. Especially those candidates who say they don't like the bill, it isn't pretty, etc. and still say it is necessary. If it is necessary then why do you not like it? O yeah, they are up for re-election in a month. It is just kind of sad to see such a horrible bill that puts such a HUGE burden on taxpayers make its way through both the Senate and the House. Now that we are bailing out private financial institutions you are surely correct in saying a little bit of the American Dream died today.
-David Carlson
http://www.davidcarlsonpolitics.com
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