bailout

I keep hearing the media say that Obama is “fear mongering” when talking about the stimulus plan. Here’s an example from today:

The Note, 02/11/09: Fear Itself -- A $3 trillion day, a bailout bust, as the president stokes fear to prod action

So we are losing a record number of jobs, businesses are closing at an alarming rate and banks are failing faster than an MLB drug test, yet some how that is fear mongering. That’s pretty ironic considering how the media bent over and grabbed their ankles when George Bush had people out there talking about mushroom clouds being delivered by Saddam.

Shouldn’t we also call it fear mongering when John McCain did the unprecedented action of suspending a presidential campaign to address a bailout? Not the media. Instead they called him things like “hero” and “leader”. Yes, for John McCain to “fear monger” is heroic.

That’s your so called “liberal” media in action right there. I must say though that I am hearing more and more people talk about how idiotic the media is and saying they are turning them off. So if enough people do that, will the media executives start “fear mongering” when they are facing massive layoffs and declines? I would love to see that day.

When banks abuse their bailout funds, the Obama administration takes action:

A Treasury Department official on Monday called Citigroup, which has received $45 billion in bailout capital from the government, to protest plans to accept delivery on a luxurious $50 million corporate jet made in France.

[SNIP]

The Treasury official called the bank to complain and told the executive to find a solution. Among the possibilities would be selling or leasing the fancy flier, since there are penalties associated with killing the contract outright.

In any case, the administration does not want the plane put in service under the Citigroup banner.

Could you imagine the Bush administration doing anything like this? While they were pumping out money to these financial institutions, the executives were walking away with huge bonuses and Bush did nothing.

That’s the message sent out by Senate Republicans last night as the auto bailout failed:

Their efforts in Congress squashed, U.S. automakers are depending upon a reluctant White House to quickly provide a multibillion lifeline to help them avoid imminent collapse.

General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks, have few options left after the dramatic defeat in the Senate of a $14 billion bailout for the domestic auto industry.

Its demise late Thursday prompted immediate calls from lawmakers in both parties for the Bush administration to tap into the $700 billion Wall Street bailout to rescue the beleaguered auto industry. The bill failed after talks broke down over the refusal of the United Auto Workers union to meet Republican demands for aggressive wage reductions.

The markets are going to fall big today. They already have overseas. But we should all be happy since the big financial CEOs still get their huge bonuses and salaries.

Geez.

The U.S. government has agreed to guarantee over $300 billion of Citigroup's troubled assets -- loans and securities backed by residential and commercial real estate and other such assets -- with conditions attached. These conditions are being hammered out.

In addition, the U.S. Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program (TARP) in exchange for preferred shares with an 8 percent dividend. Citigroup will comply with enhanced executive compensation restrictions and implement the Federal Deposit Insurance Corp's mortgage modification program. This is on top of the $25 billion that the government gave Citi in October.

But how dare the automakers even think about asking for $25 billion. Why in the world would we bail out all those blue collar workers, when these white collar workers need a life line?

Paul Krugman isn’t thrilled about this bailout either, even though it was necessary:

Mark Thoma has the rundown of informed reactions. A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.

We are hearing that a lot lately. It is a very tough situation to wrap your head around, but while people are saying we should let the auto industry go, no one is saying what to do with the millions of jobs it will cost.

It’s not that we need to bailout the auto industry, it’s that we need to secure the biggest sector of the manufacturing division. How does the opposition plan on employing all the people who lose their job when the American auto industry goes the way of the pet rock? What about all the diners, uniform suppliers, parts suppliers, and other businesses that are needed and supported by the auto industry? How do you save the towns that will be totally destroyed by the closing of their local auto plant?

Everyone can say no so easily, but no one can give plans on how to deal with the results of that no.

That’s why I have been behind Pelosi’s plan. Do I really want to see us throw $25 billion at the auto industry, when we don’t even have things like universal healthcare? Of course not, but I also realize we need the auto industry. If they are to get the money then they get it with strong conditions tied to it. Restructure the auto industry. Make them more efficient. Force them to produce cars that compete with the foreign market and help our environment.

Here are some interesting things I have heard on various shows over the past few days.

NY Attorney General Andrew Cuomo has been at the front of the battle when it comes to CEOs receiving their golden parachutes, while their companies lay off and ask for government handouts, and he isn’t backing down at all:

Calling the layoffs of 53,000 people "disturbing," Cuomo says top executives shouldn't get bonuses while investors, taxpayers and employees suffer.

Cuomo adds that other companies should consider doing the same, including American International Group, which has received billions of federal bailout dollars.

This is how government should intervene with business. Republicans think that this is “hindering the free market”, but it is really providing fairness to all involved. So many of these companies give out executive bonuses in the multi-million dollar range. Just think of how many salaries that would cover. 

It seems like the hands opening up for the free government money, aka the bailout, are increasing faster than our unemployment numbers. Now the insurance companies are lining up for their Christmas gifts:

Several insurers, including Hartford Financial Services Group and Genworth Financial Inc., made last-minute bids for billions of dollars in government money Friday.

Hartford Financial said that it agreed to buy a small savings and loan, helping the giant insurer apply for a government investment of up to $3.4 billion.

Don’t you like that trick? Want government money? Buy a troubled banking company. Welcome to the economy George built. We throw true business standards out the window and instead redistribute the wealth from the bottom up.

The economic hits keep on coming:

Retail sales plunged by the largest amount on record in October as the financial crisis and the slumping economy caused consumers to sharply cut back on their spending.

The Commerce Department said Friday that retail sales fell by 2.8 percent last month, surpassing the old mark of a 2.65 percent drop in November 2001 in the wake of the terrorist attacks that year.

The decline in sales was led by a huge drop in auto purchases, but sales of all types of products from furniture to clothing fell as consumers retrenched.

This is why a middle class bailout is such an awesome idea. If the people have more money they spend more money. If they spend more money, businesses have better sales. It's economic policy that makes sense - trickle up. We saw the opposite of that in action for the past couple of decades and the mess it produced, so it's time to reverse the flow and give it a try.