"Is the U.S. going overboard on bailouts?"

[Retire Soon]

When it comes to aid for big business, the federal government is certainly being generous these days with taxpayers' money. Occasionally a business may need a helping hand and certainly the end can justify the means, if it prevents a meltdown in our economy or that of other nations. However, there has to be a limit as to how much money taxpayers can donate to the helpless. Are we creating a culture of businesses who rely excessively on federal assistance? This is not the way Capitalism is supposed to work. Aren't CEOs being paid millions of dollars annually in salaries, stock options and bonuses in exchange for competent leadership that will make the organization competitive and profitable for its stock holders? Are we rewarding failure by coming to the rescue of our largest corporations who have CEOs and other leaders who are obviously inept, incompetent and downright wreckless with shareholders' money?

Is the U.S. going overboard on bailouts? - Los Angeles Times

[ziggy29]

I don't suppose I can count on them bailing out my 401K...

[al_bundy]

read the fine print, they aren't exactly bailouts

AIG is an orderly liquidation and Fannie the government is taking over and lately Fannie has been kicking back a lot of loans it insured due to paperwork issues

[Zoocat]

As the OP stated, the point is that these CEOs (AIG, Fannie, Freddie, Lehman, etc.) were paid millions for their "expertise." They supposedly rose to the top because of that expertise. Why couldn't they take a longer view than the next quarter's profits? I have my opinion on that but it's irrelevant to this discussion.

Now we see what lax regulation and an overly confident, even arrogant, business climate has come to. They made too big a mess now the government has to clean it up. This does not bode well for the future of "capitalism." Already, more stock market regulations are being legislated by congress.

If the country wasn't already rife with cynicism about big business and government, it will be now, big time. Now that lack of confidence will spread worldwide. How will that affect our country's ability to sell treasuries to service our humoungous debt and to pay for Medicare?

The next administration, whichever party, will be faced with a tremendously difficult economy. Don't count on any tax cuts.

[Robert the Red]

Who is being bailed out? The people who did business with Fannie, Freddie, AIG. Not the shareholders of these companies.

Now, some of these people who did business should be chopped, IMHO. In particular, those who bought credit default swaps without actual exposure to the default -- it's like my buying insurance on your house burning down.

[Zoocat]

Quote:

Originally Posted by Robert the Red Who is being bailed out? The people who did business with Fannie, Freddie, AIG. Not the shareholders of these companies. Now, some of these people who did business should be chopped, IMHO. In particular, those who bought credit default swaps without actual exposure to the default -- it's like my buying insurance on your house burning down.

Who would you suggests being "chopped"? The Chinese government, perhaps?

[Independent]

Robert says "chopped", I would say "haircut". In the BSC case, the stockholders were nearly wiped out, but the bondholders will get 100 cents on the dollar. The gov't could have let BSC go into bankruptcy, but offered to buy its debt at 80% or 90% or even 95%. The gov't offer puts a market price on the debt and allows the lenders to stay in business, but it hurts them enough that we reduce the moral risk.

[Martha]

I talked to an economist this morning. He said that the purchase/loan/bailout of AIG was necessary and cutting Lehman off made good sense. On the way home on the radio were two more economists that said the same thing (Chris Farrell and an econ professor). They all also agreed that it isn't over yet, but my economist friend painted a gloomier picture than Farrell et al. He was very critical of both candidates' economic plans and that pumping money into infrastructure and alternative energy is not going to be enough jobs.

Farrell et al. said that this is the worst financial crisis since the depression but the fed and the treasury are doing a good job of dealing with the financial crisis. The depression resulted in part from the fed raising rates, rather than lowering rates, and from just allowing banks to fail which results in a breakdown of the whole system. Now it steps in to moderate.

They all agreed that more regulation will be in the future and that we went overboard with deregulation. Markets are made, you need to decide on the rules and no rules does not work.

Me, I am just reporting what I heard. I don't know anything.

[al_bundy]

i've never heard a good economic plan from any presidential candidate, that's why they have people that work for them. Henry Paulson seems to be one of the better ones at Treasury and even Bernanke is starting to impress me