Bailout Bonanza for Bad Businesses — Will it ever end?
Kurt Brouwer November 12th, 2008
I was reluctantly in favor of the first bailout bill, the Economic Stabilization Act, because the clamor for it had gotten so frenzied that I thought failure would trigger a huge loss of confidence in the economy and the financial markets. Well, we got a huge loss of confidence in the economy and the financial markets anyway, but we got the bailout too. Unfortunately, now the government is being besieged by a long list of bailout wannabees. First, it was a few banks, then the list expanded exponentially. Then, it was the second round of bailout bonanza for American International Group. Then, Goldman Sachs and Morgan Stanley converted to bank status. Now, American Express has decided to convert to banking status. I suspect a bailout bonanza application from AMEX can’t be far behind.
Now, we have General Motors as the next bailout poster child. Plucky politicians are suggesting that we have to ’save’ millions of jobs by giving $25 billion in ‘loans’ — or is it $50 billion — to a company that has a total stock market capitalization of around $2 billion. Does anyone actually think GM is going to pay off loans of that magnitude when it’s core business is failing fast (see General Motors May Be Worthless)? Assuming the loans don’t get paid off, do the Feds then get into the car business?
I’m afraid we have gone down a dead end road here. Eventually, the Federal will run out of resources because there are far more businesses that will come begging for bailouts than even the Feds can handle. Actually, I think we may have already promised more than we can do. And, remember, all the cash that is being promised to bail out these bad businesses has to come from you and from me, in our role as gentle and long suffering taxpayers. Here is just one example of state taxes going up (see California Taxes Going Up). Can the Feds and other state governments be far behind?
Finally, as this rant winds down, I have to point out that it is economically very unwise to raise taxes in the teeth of an economic downturn. Yet, that is exactly what our fearless — or feckless — leaders have in mind.
- Business , Economy , Geopolitics , Money , income taxes
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Nice post. Straight to the point and what most of us are thinking.
[…] If there is a bankruptcy at GM, we should certainly do something to mitigate the pain suffered by its employees and its retirees, but dealing with that issue can wait until we find out whether or not GM joins the bailout bonanza (see Bailout Bonanza for Bad Businesses — Will it ever end?). […]
[…] If there is a bankruptcy at GM, we should certainly do something to mitigate the pain suffered by its employees and its retirees, but dealing with that issue can wait until we find out whether or not GM joins the bailout bonanza (see Bailout Bonanza for Bad Businesses — Will it ever end?). […]