The government's new mascot

The once in a while Rant

So occascionally I use this blog to vent and rant a little, this is one of those times. Last night the Government loan to the Auto Industry failed. We gave $700 billion to the banking system to stop a worlwide banking failure, no biggie right? The government had no problem saving one institution that screwed themselves over, but when the auto industry needs to be saved, just wait one minute there what about the little businesses they ask? Yes the auto industry needs to be updated and needs to be more competitive. Last year both Toyota and GM sold the same amount of cars about 9 million cars each, GM did it at a $38.7 billion loss, Toyota $17.1 billion dollar profit. That is not competition that is a total ass kicking, they are dead even in sales yet have no chance at competition. P.S. Cerberus/Chrysler if you want govt. money make your books public, don't tell me you're broke without proving it.

But this is not the point of the rant, the $15 billion dollar loan is denied, ok, but what the hell is the Fed doing loaning $2 trillion dollars to unnamed institutions. Where the hell is Congress to go wait a minute on that shit. From Bloomberg:

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

So we can't save a large industry, unless you are a bank, then you can say you are just too big to fail and we go Well OK, now where are the rabbits Lenny, I want to play with the rabbits. But if you are not a bank we ask questions, and think of our constituents. Hell they let American Express recategorize themselves as a bank, to get money from the bailout, and have put the paperwork to recategorize yourself as a bank online. So GM become a Bank, get the bailout money, hell we all know the government will never get a dime back from that. Read the Bloomberg story here.

Me, I'm going back to thinking about how a few years ago, in business school going over the whole but the credit derivatives can't be covered what happens if the economy gets like totally f*cked? Don't worry that won't happen! HA! I remember all those offers to work for the risk arbitrage department, nice that would have been fun. I could only imagine looking at the screen and hearing crying/screaming when all the cards fell. Hell if we could see it in school, why did no one in the banking institution see this coming? Oh wait they did, but if you brought it up at an interview, that's where it ended and they wanted nothing to do with you. So Congratulations to the few who had enough money to actually make a killing by forseeing what would happen, and becoming rich off the stupidity of your colleagues.

The Bailout

Alexis de Tocqueville said: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

Thomas Jefferson said: “I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Can we be fooled to bail out the banking system with our own money? A few years ago Bush vetoed a bill which would have spent $32 billion dollars to give children from low income money insurance. F*ck them he said we don't have the money, when the rich boys from New York, and Washington come crying to him that they screwed themselves over he almost trips over himself to race to give them money. OK our financial system is f*cked, banks screwed it up, now we have to save them, but they had months if not years to fix their sinking ship. Ins ted of just directly giving the money to the banks for their bad debt from the bad mortgages they gave out, they could have given the money to the home owners who lost their house to the foreclosure, but wait that would eliminate the bad debt, and the high foreclosure numbers, and stupid thought might actually help people who need the help.

So they now want $700 billion dollars to save the economy, they must have spent hours if not days coming up with the figure to resurrect our economy, right? A treasury spokeswoman when asked about the figure said:

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Great, so we enlarge the national debt for a figure they pulled out of their ass. In 1992, Sweden faced an almost identical crisis with their banking system after a housing market collapse but did they fork over money, NO!
"Banks had to write down losses and issue warrants to the government.

That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well"(Ny Times)By requiring equity from the banks for their bailout, it almost guaranteed that the banks would do everything they could not to require the assistance, and forced the banks to find capital themselves. And the best part is when the banking system corrected itself, the government, or tax-payers got their money back, maybe not all of it but at least their was a return on their investment.

"By the end of the crisis, the Swedish government had seized a vast portion of the banking sector, and the agency had mostly fulfilled its hard-nosed mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again." See their plan worked!

But this whole situation reminds me of a Dilbert comic, and maybe I'm the wuss but I don't think we should just give a banking system that screwed themselves and the rest of us free money.