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September 21, 2008

A brief history of U.S. government bailouts

ProPublica created a handy table of U.S. government bailouts since 1970.

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Lindsay

Looked at this for one second and see major errors.

It shows Chrysler has "costing" the US taxpayers $3.9 billion. The US gave no money to Chrysler, nor did it lend Chrysler any money. They guaranteed loans made by others --which were repaid early. The US taxpayer lost nothing on this.

The NY City bailout also did not "cost" $9.4 billion. NYC has paid all those loans on time and in full.

Whoever wrote this should be a lot more careful with the terminology. The right most column should read "amount at risk" rather than "cost", which is probably incorrect in each of the examples given.


Under the Bush proposal, no matter how corruptly the $700 billion is used, Henry Paulson is above the law:

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Henry Paulson could buy himself mansions with the money, and since mansions are "mortgage-related assets," the court system couldn't stop him.

Henry Paulson can also guarantee that his friends profit on "mortgage-related assets" by buying them for Treasury at a higher price than his friends paid.

The law could be amended to require that Treasury buy the products for LESS than the seller paid for them, but I haven't seen that proposed anywhere.

Ideally, the whole bill would be rejected.

Yes, the article and figures are VERY misleading, for reasons stated above. It is my understanding that, in fact, the U.S. owned some sort of equity in Chrysler. Perhaps it was part of the deal of guaranteeing the loans. This turned out to be a windfall for the taxpayer. I remember because when Chrysler was recovering and doing very well, and the US owned interest was very valuable, Iaccoca tried to talk the White House into letting Chrysler keep all or part of it. [Chutzpah?] Chrysler was told to shove it and the taxpayer made a lot of money.

Here are two little known facts about the S&L collapse and its aftermath.

1. Almost no one was prosecuted, except for a few like Charles Keating. The judge sentenced Keating to a life of torture and debasement on France's Devil's Island off Guyana. [I exaggerate, but that was the judge's intention.] Most people don't know that much of the conviction and sentence was eventually overturned or thrown out or reduced or whatever.

2. There was very little tort action taken by the Feds even though our Justice department could have gone after the one's involved and recouped a lot of money. EVERYONE in banking and the justice department knew that the liability of individuals and institutions was about as open and shut as you can get. So, --- Drum Roll, Please --- the national trial attorneys organization petitioned Congress to enact legislation allowing them to go after the S&Ls on a contingency basis with no cost to the US taxpayer. The trial attorneys can beat the shit out of the those responsible, the rascals and their insurance companies pay up, the trial lawyers make a huge amount of dough, the politicians who were bought by the S&L lobbyists and PACs get bounced, and the taxpayer recoups a large part of the loss.

2. ...continued. Sounds good, right? Here's where the Democrats in Congress can stick it to the Republicans, right? Wrong. It turns out that the Democrats wanted nothing to do with it because they were in as deep as the Republicans. The Democratic poster boy, er, poster greedy grownup, in the S&L collapse was John Glenn. Yes, you heard me correctly. It's the same Mercury 7 astronaut, and the first American to orbit the earth. Imagine, so close to recovering tens of billions of dollars, and then the Democrats and Republicans get together in a rare spirit of bipartisanship to save their own skins and piss away our treasure in amounts unheard of till that time.

Vote Nader. I am.

Eric Jaffa,

Thanks a lot. I was not aware. I'm not surprised, though. Consider voting for Nader.

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

So you say it wasn't your bright idea to introduce anarchy into the financial system, cause a once-in-a-century (according to A. Greenspan) economic meltdown and bring the IMF to our front door. You say you'd rather waste the money on some utopian dream of "universal health care" or "bridge repair". Well, I'm sympathetic, but to be honest we really don't have time to discuss this. If you don't hand over the money like, yesterday, Saddam Hussein is going to use his secret accounting books to destroy our economy. And how many times do we have to tell you? Transparency, checks-and-balances, oversight; all that shit just weakens America.

Yes, I know I wasn't ringing these alarm bells last week. I was in the middle of a book, okay?

And don't you dare try and put any conditions on it, or start talking about some kind of socialist regulation. I mean, who the fuck do you think you are, anyway?


"House Republican staffers met with roughly 15 lobbyists Friday afternoon, whose message to lawmakers was clear: Don't load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.

"'We're opposed to adding provisions that will affect [or] undermine the deal substantively,' said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, whose members include the nation's largest banks, securities firms and insurers.

"A deal killer for the group: a proposal that would grant bankruptcy judges new powers to lower the principal, interest rate or both on a mortgage as part of a bankruptcy proceeding.

"'If there's a risk a judge could change the terms...that will increase the risk of mortgages [and] increase the cost,' Mr. Talbott said. 'It makes homes less affordable for everybody.'

"Brokerage firms are fighting limits on executive compensation for firms that participate in the package, saying that particularly in an industry under siege, the limits will hurt their ability to find and retain top brass. The industry could lose that one: proposals to limit executive pay enjoy bipartisan support and backing from the Republican and Democratic presidential candidates." (from the WSJ, via Echidne)


So we understand each other: we know what's best, and you know we know what's best. So hand over the money, please. Now.

We live in a free market economy, supposedly. Free market means if a company can be successful without selling defective products/services it should reap the benefit of profits earned. Free market also means that if a company runs itself into the ground, the business (or industry or individual) should eat cake. For the past several years financial kingpins have been raking in record profits. Where was the sense of urgency in recent years to avert this crisis that everyone (and their financial adviser) saw coming? The companies could have made sound decisions about how to handle debt investments, but instead took the quick money to pump up their share value & executive compensation. 30 to 1 debt to equity ratios? ARE YOU NUTS?

You either make it, or you fold up shop. If the financial markets collapse, so be it. Companies take the risk, and if they win they rake in money for themselves. If they fail...we all pay the price? Or guarantee their solvency? Hogwash.

Why are we even bothering? This is capitalism...The financial giants FAILED, and they should pay with the failure of their companies. In an 'ownership' society, company owners need to OWN UP to their loses and suck it up. I don't care if anyone in my family has to work another few years to make up for it. It's better to let the markets find real value over time than to prop them up with deflated dollars and junk debt.

Don't expect me to guarantee for a bailout after all the warnings. 'Deregulated' does not mean STUPID.

I agree with reventative.

Either we have a free market economy, or we try something else. The current system privatizes profit and socializes risk. We take away all the rules so that capital can make as much money as possible in good times, becoming so bloated in the process that we all depend on its scraps for sustenance, at which point our tax dollars bail it out so that our crumb supply won't be catastrophically interrupted. Such a deal.

The relative absence of rules is precisely how the fundamentalists define a "free market" these days. It seems to work about as well as an air traffic control system without rules.

Meanwhile, John McCain promises to do for our health care system what he's already helped accomplish for the financial sector:

http://krugman.blogs.nytimes.com/2008/09/19/mccain-on-banking-and-health/

Norman Costa -

Either John McCain or Barack Obama will be president in late January.

I plan to be involved in that choice by voting for Barack Obama.

While people should read Ralph Nader's writings and watch his interviews, etc., when casting a vote one should choose the lesser-of-two-evils from the two major parties.

In 2000, Al Gore and George W. Bush seemed to have a lot of the same policies, but we now know how different the Democrat and Republican are. It is important to vote for a Democrat.

Either we have a free market economy, or we try something else.

There are more than two models of running an economy. The private risk model failed very spectacularly in 1929. Then the US had a more diverse economy than now, and big finance was a smaller part of GDP. Now, it'd fail even more. Conversely, throwing away the free market only works in certain cases and only in developing industries/countries.

It's one thing to say the American economy is encouraging bubbles. It's another thing to say that during bubbles, the correct response is to throw New York to where it was in 1931, only with more cars.

"The relative absence of rules is precisely how the fundamentalists define a "free market" these days." --Cass

The irony of deregulation: companies get enough rope to pull down larger profit or plenty of line to hang themselves. The problem with our version of socialized-capitalism is that we (the taxpayers) get the tab after the fat cat Titanic inspired 10 course feast.

In today's modernized capitalism, failure is relative. Insolvency & closure only happen to those poor second-tier corporations who can't afford a coterie of silk stocking lobbyists.

THE SECOND CHICAGO SCHOOL OF ECONOMICS

This post and comments have done two things for me.

1. It reminded me of my favorite quote from Milton Friedman, Nobel Laureate in Economics, monetarist, etc. He defined the business man this way: "The business man wants the same rules, fair play, and even chances for everyone. But, for himself he wants privilege."

2. It's making me feel depressed and inadequate.

I'm gonna shell some peanuts, have a Guiness draft, and go to bed. When I wake in the morning, I think I'll stay under the covers until it all goes away.

Keep in mind that the financial deregulation happened under your President Clinton and the champions of forcing banks to make loans to unqualified borrowers were Dodd and Frank and the Democratic Party.

This isn't just a failure of unregulated anything and your friends' fingerprints are all over this pig, right there with those of Gramm and the rest of the Republicans.

In 2000, Al Gore and George W. Bush seemed to have a lot of the same policies, but we now know how different the Democrat and Republican are. It is important to vote for a Democrat.

Because we obviously know that 8 years of Democratic control would have been completely different. I mean, look at how they've shaken things up since the Democrats regained control of Congress.

Aye

They're on the same payroll. Don't forget that. He who pays the piper calls the tune.

Its a failure of radical free-market ideology, which has been more or less the official stance of the G.O.P. since 1980. The fact that President Clinton and many other Democrats repeatedly caved, and moved the party rightward over the last twenty years is not going to come as news to anywhere here.

The great lie at the heart of this ideology is that the government in this system is neutral. Its not, never has been and it never will be. The moneyed interests who invest their cash in our representatives aren't doing it out of civil responsibility, and they don't want a "level playing field". They want to write the rules and game the system to their own percieved advantage. And "socialism for the rich, laissez-faire for the rest" is just the inevitable outcome of all this.

The record shows

That Clinton signed the financial reforms with enthusiasm

That McCain sounded warnings about Fannie Mae and Freddie Mac and the Dem leadership in the House and Senate did not listen or act

That Obama was on the payroll of Fannie Mae and Freddie Mac more than any US Senator

You cannot bullshit your way around these facts.

Since when have we ever tried to B.S. our way around the failures of Democrats? We know how miserable they often are at protecting our interests. The difference is, they're at least half-assedly trying. Again, for the G.O.P., deregulation and free-market fundamentalism (i.e. capitalist oligarchy) has the status of a holy faith. And that effectively is quite a difference.

Yes, but when your candidate was on the payroll of Fannie Mae and Freddie Mac and when my guy tried to fix things, I think it is in your interest as a believer in good government to consider voting for John McCain.

McCain has a record of independent action and thought that Obama simply does not have. Please vote McCain.

"McCain has a record of independent action and thought that Obama simply does not have. Please vote McCain."--The Phantom

I'm laughing so hard it hurts.

There's no way I would ever vote for wrong way McCain, especially for president. He's no maverick.

Lack of intellectual curiousity? check

Foolish positions in most policy areas? check

Will lie & pander to get elected? check

Look, my biggest fear with Barack Obama is that he will turn out to be a Bill Clinton and sign laws just like the 99 banking reforms act. However, I can think of many other reasons to vote for him this fall. I couldn't stand Bill Clinton, but I voted for him twice because his stance on a number of issues more closely mirrored my own. John McCain just doesn't share enough of my policy positions...despite the fact that I think he's probably a nice guy outside of politics.

I'm voting democratic this year for two main reasons: scientific research (an area that republicans are WOEFULLY lacking) and women's rights (no need to explain this one...)

McCain's actual words, from 2006

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac play...

No one listened.

The Phantom -

Republicans controlled the US Senate in 2005.

Only the Senate Republicans could have put that bill to a vote, and chose not to.

parse -

Al Gore wouldn't have started the Iraq War.

Al Gore wouldn't have turned a budget surplus into a budget deficit.

"No one listened."--The Phantom

No one listened because the House was controlled by republicans looking for reelection and the Senate had a razor-thin majority that was unable to get traction on many issues. Given the political climate, nothing was going to get done. Since 2006's democratic takeover of congress, President Bush has pulled out the veto pen.

Good ideas come from both sides of the isle, and sometimes a clarion call is made from the most unlikely of sources. But it doesn't change the fact that republicans are generally against meaningful reforms for business interests across the spectrum. If the money is free-flowing, republicans are quick to defend bad practices and lack of fiscal oversight, but when the shit hits the fan republicans are quick to blame everything on everyone else.

Phantom, you need to admit that the past 20 years or so of conservative rules and mindsets have been quite an impressive failure.

I'm in favor of light and effective regulation

But in the case of Fannie Mae and Freddie Mac there was out and out effort to mitigate and relax lending standards in order to give people a chance at home ownership--led by Chris Dodd, Barney Frank, the Black Caucus, many others.

An admirable goal but employing very wrong means of achieving it.

--

I am not sure that anyone would have or could have seen the fallout from AIG's credit default swaps. I never heard anyone addressing this type of issue from either side.

And its tied to the same Fannie Mae and Freddie Mac and banks who whose underwriting standards were relaxed under Dem led govt pressure.


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