Tag Archives: bailout

Failure of the bailout

The $700 billion bailout bill was supposed to save the economy from collapsing into ruin. While I had a bad vibe from the bailout bill because of the huge debt it incurs on the federal government and what it could incur, not to mention the moral hazards, it now seems that it isn't even accomplishing what it's supposed to be doing.

One of the things the bailout bill was supposed to do was to prevent large financial institutions from collapsing and taking some wealth from everyone with them. But the much more important and relevant function was to get them to make loans and investments again so that corporations in other industries can get the day-to-day capital they need to maintain their businesses. If this latter goal isn't achieved, then there isn't really much point to the financial bailout bill.

But it's failing miserably. Not only do we hear all the grumblings that the required loans aren't being made and the credit markets are still largely frozen, but we also have a vivid example of its failure with the attempted automaker bailout. If it was working, why are the automakers asking the government for loans? They should be asking the banks! Either the bailout bill is failing miserably to achieve its most important goal, or the automakers know that they can't pull the wool over the banks' eyes so they are trying to pull it over the public's.

Whether to bail out auto companies

American automakers seem to be begging for financial assistance from the federal government. Given the large number of people involved in the automobile industry, it's understandable that many people want to bail them out from possible bankruptcies. I have a different opinion. Given their historical performance in recent decades and their reluctance to change anything, I think they should weather the economic downturn on their own.

Unless they can put forward a viable and concrete plan to change their fortunes without outsourcing everything, putting up dozens of billions of dollars worth of loans may be throwing good money after bad. Unfortunately, the leaders of these companies have mostly focused on threats about what would happen if they went bankrupt, rather than outline changes in long-term policies and priorities that would change their fortune. A lot of people are afraid that the companies might go under, but it looks like they've been consistently self-destructing, anyways. It might be a lot better to put the money into infrastructure investments that will pay off economically instead of wasting it on drowning companies that would go bankrupt whatever we do.

It's a good sign that Democrats are now starting to think the same way, although I think they're still giving the auto industry too much benefit of the doubt with the way they're so eager to help the companies. However, I'm not sure it's a good sign that I'm actually agreeing with the Bush administration on this issue ...

Incredible Republican pettiness

It's one thing to vote against an important bill and being honest about thinking it's a bad bill. It's another thing entirely when the bailout bill is rejected out of pure pettiness. Or at least a pretense of pure pettiness; I'm not sure which is worst. The bailout bill is incredibly important, no matter whether it would be the economy's salvation or its downfall, so it's extraordinarily inane that House Republicans would claim that they voted against it purely because the House speaker was critical of the Republican Party.

The critical speech by House speaker Nancy Pelosi may have been inappropriate (I don't think so, but I can see their point), but I can't believe anyone would cite this as a reason to vote against the bailout bill. If they thought it was a disastrous bill, then they should have said so, not try to use a ridiculous excuse that puts the House Republicans in an extremely bad light.