Friday, November 14, 2008

Bailout? What was I thinking?

Well, based on the latest news I think it’s time for me to admit to my mistake. Supporting the government bailout was dumb…very, very dumb. I heard our politicians telling us that we were facing a crisis, something that was going to affect us all. I believe “main street” was the catch phrase du jour and I fell for it. Dumb.

My fellow conservatives were shrieking their disagreement and I didn’t listen. This was different. These companies were too big to fail. I was caught in the net of fear and I trusted the government to be responsible with the money. I trusted them to draw a line, to avoid the temptation of extending its power and getting more involved in the free market. This was supposed to be the exception and not the rule and I trusted the government to abide by that. Very dumb.

Gingrich led the opposition, stating that this amount of money would bring unprecedented corruption to Washington, that there was no way they could control it and that there was no guarantee that it would work and the taxpayers would get paid back. He made some very good points but I gave in to the fear that the White House was brewing, that Congress was echoing and I voiced my support for the package on this very sight. Big mistake. Now look what’s happening. Pandora’s Box has been opened.

First, the treasury says that of the initial $350 billion that was freed for bailout purposes, all but $60 billion has already been allocated. In other words, they’ve already burned through nearly half the money. Hank Paulson sat before Congress and told them that the money was needed urgently so he could begin buying up “toxic debt” from our financial institutions. To delay action would be catastrophic.

To this date not one dime has been spent for this purpose. In fact, I’m not sure if anybody really knows where the money is going. Paulson hasn’t exactly been 100% up front about it. Transparency and accountability? These words don’t exist inside the monetary vortex of Washington.

Two days ago, Paulson declares that he has changed his mind and will instead use the money to purchase stock in failing companies and let the companies themselves use the added revenue to solve their problems. In addition, he has extended the taxpayer infusion to other industries, including credit agencies, insurance agencies and others.

And the results? Unless I’m mistaken, the economy continues to fall, credit is still frozen and no one on Wall Street has any confidence to invest because of the uncertainty the government has created by playing god with the free market. In fact, every time Paulson opens his mouth the market drops. Not a good thing considering this guy is an unelected official who has been granted the power of a soft tyrant. The precedent is dangerous.

And, worst of all, government action hasn’t helped. If anything, the government has made the situation worse. The market has yet to correct itself because of all the uncertainty created by Washington. Like I’ve always said, if you want something screwed up really bad then let the government handle it. I violated that principle by initially supporting the idea of a bailout. Very, very dumb.

Now the automakers are asking for a bailout and Obama and Congress appear poised to give it to them. I thought the bailout was meant to save main street, not any company that flirts with bankruptcy. It would be a shame if the Big 3 went under, but that won’t affect me and it won’t affect the majority of Americans. Yet the government feels compelled to continue their free market meddling at my expense.

Washington has been swarmed with an army of lobbyists each trying to secure a piece of the bailout pie. The president of the American Bankers Association voiced concerns yesterday that money won’t be available to help smaller banks free their credit lines. A long line has formed with hands out and the smaller banks are apparently at the back of that line. AIG is going to get more money because the original $75 billion wasn’t enough. American Express just announced that they’re now a bank holding company, most likely because they also want some government money. AllState, Metlife and GMAC financing are also in line. But that’s not all. Lobbyists from the National Marine Manufacturers Association and the National Automobile Dealers Association both want money so dealerships can “keep their showrooms stocked”. How exactly does that relate to a national financial crisis? It’s now the taxpayers’ responsibility to make sure my corner auto dealer keeps his showroom stocked?

Today, Freddie Mac is asking for more money. Sure! We’re writing checks Left and Right, why not give more taxpayer dollars to a failed and sinking franchise?

And let’s not forget about other governments. Several states have begun begging for federal money, along with some larger cities. If it’s my responsibility to bail out the auto industry, then why not bail out legislatures who can’t even balance a checkbook??? Fiscal responsibility for state and local governments is now nothing more than a suggestion as long as big brother Fed is there with money whenever you can’t balance your own budget. In the Washburn household, whenever income isn’t sufficient we cut expenses. I guess that’s too much to ask for government agencies.

And if that isn’t enough, the Fed is intent on changing the rules regarding federal money – as evidenced by Comrade Paulson’s latest decree. I guess there are no contracts here. Some Dems have discussed further restrictions on executive pay and shareholder dividends. Folks, when you change the rules like that it scares off investors and injects the most virulent of atmospheres into the market…uncertainty. This makes it more difficult for these companies to free themselves from the government nipple and operate independently. Perhaps that’s the idea, I don’t know.

"We are like a tenant signing a lease contract with the landlord where the landlord can come back and change the terms after the fact, and in fact we are going to have a new landlord in a couple of weeks," said Ed Yingling of the bankers association.

It appears that companies who take this money have just signed a deal with the devil, and there is no way out. I think the same can now be said of us taxpayers. And to make matters worse, all of this is happening on the eve of a dramatic Left shift in Washington, where politicians will be eager to exert maximum government power over the free market. Any industry that asks for money will likely get it, at a very steep cost. Once the government gets their claws in, they won’t let go. My fears of socialism are looming larger every day.

No lines have been drawn, no one has clearly defined the stopping point. No one has clarified just how far the government will go. Will this continue until Washington has ownership stakes in every corner of the economy?

We hear world leaders criticize greed in the free market, yet no one is willing to allow the greedy to get what they deserve….bankruptcy. I’m at the point where I’m okay with them all failing. Whether we’re talking about automakers or state treasuries, let them all go bankrupt. Instead, we bail out the greedy with main street’s dollars in the name of protecting main street. So far, the tally comes to about $10,000 for every man, woman and child in this country. I personally think it would make more fiscal sense to give that money to the people. Imagine the economic stimulation of 10K for every US citizen. No, that’s way too simple. Let’s instead use it for the government’s own portfolio and (according to Obama) RAISE taxes on main street. It’s all rather nauseating. What was I thinking?

Dumb, dumb, dumb.

Before all of this I thought Bush’s greatest failure was not anticipating the insurgency in Iraq after Hussein’s departure. No more. Free market capitalism took a giant step backward to give way to neo-socialism under his watch, and he championed the cause locked arm-in-arm with Congressional Democrats. Now he has the audacity to say the government shouldn’t go too far.

Mr. President, with respect, once Pandora’s Box is opened there is no closing it.


Anonymous said...


You may recall that Pandora managed to close the box, saving hope for mankind.

Whereas, some of your fears are well founded, I interpret the situation somewhat differently, although I am no great fan of Henry Paulson.

Every doctor I know (save one although he he admits he has never watched an entire episode) hates the show "House" which is a favorite w/ me and mine.

The current situation is just like this show. The protagonists are confronted w/ a dizzying array of symptoms and the object is to save the patient. The protocols that are initiated first fail to cure and sometimes exacerbate the problem.

Although there is always an "Aha" moment in the show, about 7 minutes from the end-- we call it the "House" momen--when Dr. House figures it out after he sees a seeemingly unrelated set of facts, I do not think that Henry Paulson will experience such an epiphany.

I do appreciate that he is trying to accomplish the bailout on the fly. There are some paradigms to guide him and investing in banks by buying stock did work in Sweden in the 1990s.

The idea of the government buying the toxic mortgaes fell by the wayside as I knew it would b/c the mortgages have been so securitized, it is impossible to find them and "cure" them by purchasing them outright.

The foreclosure problem has to be fixed by the the mortgagors renegogiating w/ the banks w/ government assistance. The head of the FDIC, Sheila Bair, has plan that may work for this.

Obviously, no one is happy w/ the situation and the banks are going to have to start extending credit for our economy to revive.

I do think that things are going to worse b/f they get better. I heard that Sun Microsystems, which has a lot of employees in CO, has just announced layoffs.

But here is the bottom line. This is the worst financial crisis since the Gtreat Depression. Doing nothing and letting "the market" correct itself is not an option. Government intervention is necessary but you are correct that the jackels must be kept at bay.

The Loop Garoo Kid


At Last, we have a moderate tone, sans ridicule, from the Loop Garoo Kid!

Now, hopefully we shall see even more "moderation" from the Obama Campsite, with the acknowledgement that "Conservative Values" are not to be totally caste aside as we briefly embrace and experiment with neo-liberalism, with its 1000 & One Empty Promises and 'Freebies For All' Governance!

With the RGA Governor's Meeting in Miami, and 2010 just ahead of us (!) the Two-Party System Lives On!

Is this a great nation, or what? reb


NOW, if we can discuss THREE vital issues facing Obama...

a) Energy Independence from O.P.E.C. (Priority One).


b) Nuclear Power Generation & Our Abundant Natural Gas to Power-Up Our 18-wheeler Trucking Industry!

c) Drill Now! New Refineries Now!

Anyone Disagree?


Dr John, I believe I've read a few
naive comments from some of your regular visitors...

IF some are unaware of the meaning of EVIL, and When Evil Prospers, have them check our Nov 17th Post!

"Obama's First Act"! reb

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Anonymous said...

I knew this would happen