Bailout Blues - Policy vs Rhetoric
Posted by Jeff Pruitt - 7/16/09 @ 12:44 pm - Filed Under National Politics
If you aren’t reading Rolfe Winkler at OptionARMageddon then you probably should be. Here’s an excerpt from a recent post regarding the wasteful (and harmful) way the government is using financial bailouts:
The primary argument defending bailout packages for banks and homeowners is we can’t let them go bust, it would be too harmful to the overall economy. No doubt it would be harmful. But what did we learn from GM? Primarily this: Writing blank checks to failed debtors is tantamount to flushing money down the toilet. That’s far more harmful to the economy. We build up more unpayable debt while accomplishing nothing. Better to spend the money restructuring those debts so that the business can be properly recapitalized.
This is what needs to happen with ALL of the country’s largest banks. Their busted assets need to be written down and their shareholders and (some) creditors need to be wiped out. Do that, and the financial system will emerge leaner and healthy. This will certainly involve government support, primarily via FDIC as it absorbs losses of received assets.
But that’s better than straight bailouts, which only keep dead banks walking. More money doesn’t make them any less dead…not until their balance sheets are fixed.
I couldn’t agree more. Unfortunately, homeowners, taxpayers and small business bear the brunt of this recession while Wall Street banking firms lose nothing - in fact they continue to unfairly profit at the expense of the afore mentioned parties.
I remember attending a speech by then-Presidential candidate Obama about racial and economic justice. I left there inspired enough to write what I feel was one of my best pieces here at FWP. Unfortunately, the economic policies of President Obama have not lived up to the rhetoric I heard that day from candidate Obama.
Until he comes to the realization that Treasury secretary Tim Geitner and Fed chairman Ben Bernanke are a huge part of the problem I don’t think this will change. Taxpayers will watch their wealth deteriorate at the expense of aristocrats in DC and Wall Street.
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This is another issue, one of a growing list of issues; where the Obama Administration is parroting the policies of the Bush Administration.
Mike Sylvester