Reply #168: The hell? We're not being robbed. [View All]

[mb7588a]

Equity provisions offset the cost of the loan, and the government can even make money. Also, if a bailed out company continues to flounder, the government's loan is still guaranteed by the company's assets. In AIG's case, the guarantee is, in part, profitable insurance businesses. The government gets an 80% stake in the company. There's also 8.5% interest on the loan. Yes, there is risk in this...

But, I dunno... Coughing up cash to avert a global economic depression isn't all that bad of an idea. This ultimately IS about helping the little guy. Millions of people's loans, credit, retirement, and investments are at risk. It's making sure that credit and insurance is available and capital is not shrunk so much that further ripples reach anyone, crony or not. AIG operates in more countries than the State Department (joke) and has a broad client base.

The cronies are also forced to step aside. Almost all of the high-level management gets replaced and their ugly tactics are stopped.

These bailouts are an absolute last resort - they are not so simple as a crony saying, "Hey, we need some help." The only other option was bankruptcy. The impact of a company like AIG or GSEs like Fannie/Freddie collapsing on any given day of the week or any given hour of the day would be like nothing we've ever seen. They were at that point.

Lehman and Merrill Lynch did not get bailouts because they are beyond the point of return. AIG, Fannie/Freddie, and Bear Stears got them because the government can make a penny off of it and help the overall situation at the same time.

I grant you this is a very complicated and difficult process - many doctoral theses will be written on this. But government bailouts are not always a bad thing and are not at all comparable to the funding of entitlement programs you mentioned (real or not). Entitlement programs require revenue (tax) and outlays (spend) and hoping it works (question return). It's a different money process. It is, however, the same process that accounts for money for the war.

If you want to rant, focus your attention on the deregulators like McCain and Gramm. Rant about the lack of communication between the fed. and Congress and the fed. and the people - it's all closed door! Rant about the nearly unfettered lending power of the chairman of the fed ($800 billion!). Please, continue what you're saying about the war. The war, with its relation to our budget deficit and national debt, are a significant cause of this financial meltdown. It wasn't only the housing issues and deregulation. George W. Bush and his party are directly and nearly entirely responsible for this.

Finally, take a real good look at the math behind what's been happening and consider the consequences of government inaction (depression).