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Why
Giving Banks More Money Wont Work
by
Phil Staudt
March 29, 2009
The
Phil Staudt Blog
What
happened to that stimulus check Obama told us we were going to get when
he was campaigning? It went to AIG and banks and car companies. Last
year the government sent out $150 billion in stimulus checks, and it was
spread out all over the country to everybody, even unimportant peons
like me. But instead of doing that this year, trillions of dollars went
to slicksters on Wall Street and crooked bankers. But since I didn't
contribute hundreds of thousands of dollars to the campaigns of Obama
and Dodd, like AIG did, I didn't get any of that.
Lets take a look at the way this grandiose bailout looks to an average
peon like me:
Lets say you have a neighbor who buys brand new expensive cars all the
time and is always throwing lavish catered parties, and the trash ends
up all over your yard. While you are sleeping, his kids are breaking
into your home and stealing things from you, and he parks his car in
your front yard because he doesn't have room at his house. But the poor
guy loses his job, so he comes over and gives you a sob story and asks
you for money. So you give him $10,000 and tell him that he can pay you
back when things get better. So he buys a new car and has a party to
celebrate. When he comes back over and wants more money, you shake your
finger at him and tell him he needs to be more responsible, but you give
him another $10,000. So he goes out and trades in his new BMW for a used
Escalade to show you how responsible he is now. However, instead of
going out and getting a job, he stays at home and watches TV every day.
Now you tell him that you want him to go out and get a job so he can pay
you back, but you also tell him that you will keep giving him money as
long as he needs it, because you are not going to let him fail.
The question is, boys and girls, when will your above neighbor go out
and get a job? WHEN HE CAN'T GET MORE HANDOUTS! duh.
When are the banks going to take risks and start loaning again to make
money? WHEN THE GOVERNMENT STOPS GIVING THEM MORE MONEY! duh.
So lets say you go back to your neighbor whom you have bailed out
several times, but he isn't going out and looking for employment. Maybe
all you need to do is give him more money so that he goes out and finds
a job. How well would that work?
It wouldn't make any sense in any deals that have involved money since
the beginning of time, so why should we believe that this methodology to
save the banks by dishing out trillions of dollars to them, and telling
them that they will not be allowed to fail no matter what they do, and
THEN working out the details later , is going to work out in favor of
the taxpayers and all the unimportant peons like me this time. So why
have Paulson and Geithner and Barney Frank handed out trillions the way
that they have?
Going back to your bum neighbor, lets say that you want to assist him in
getting a job, so that he can get back on his feet and pay you back, so
you decide to pay top dollar to a recruiter to hook him up with a high
paying job so he can go back to partying and buying new expensive cars,
and eventually maybe pay you back, too. Lets say that the recruiter you
are paying to help him is his brother who has been partying with him for
years at his house. How well do you think that would work out?
Maybe that is why Geithner and Paulson and Dodd and Barney Frank might
not be the right persons for the job of overseeing the bailout to their
buddies in the banking business.
Going back to your bum neighbor and his brother, lets say you become
concerned that maybe he and his brother are just taking your money and
pissing it away, so you decide to hire a detective agency to check up on
them. Conveniently, the guy who owns the car dealership where your
neighbor buys his cars, and who also owns the catering company that
caters all his parties, also owns a detective agency. So, you pay top
dollar to hire that detective agency to check up on your bum neighbor
and his brother. How well do you think that would work?
Having politicians bringing these people in front of the big screen so
they can pretend that they are watching out for us is a farce. All of
the bright financial advisors that our country pays to keep us out of
financial trouble (how well has that been working?) have all agreed that
the stimulus checks did not work to make the economy better. But the
economy was better for several months after the checks started going
out. For that brief time retail sales improved and unemployment did not
rise and the stock market went up, even though foreclosures were
multiplying and bank stocks were tanking.
Instead of Bush and Obama handing out trillions to mismanaged banks and
AIG for the past nine months, what if the government had made a $10,000
loan available to anyone who owned a home, regardless of their credit,
with the government becoming the the first debtor to be paid back and
own the house in the case of a default, and make the conditions of these
special home-owner loans the same as student loans that need to be paid
back even if the recipient of the loan files bankruptcy? The loans could
have been made at an interest above the interest being charged by banks,
so it wouldn't just benefit the wealthiest with good credit (which is
the current plan they are hatching), and since banks wouldn't be getting
any bailout money, they would still be in the business of having to make
loans in order to survive, and the banks that had been taking care of
business and had been responsible in the past could have, and would
have, made loans available that were more favorable for those who have
good credit and cash. That would have put a stop to a lot of
foreclosures and the good banks would have thrived and the irresponsible
goofballs that are receiving taxpayer money now would have gone bye bye.
Of course, that would be a really risky way for the government to handle
a housing mortgage foreclosure crisis that affects all of us, but
compared to what they have been doing with taxpayer money, it would be
safer than Air Force One. And furthermore, it would have difficult for
Bush and Paulson and Obama and Geithner and Barney Frank to siphon off
billions of dollars and put it in the pockets of their buddies (but they
still would have found a way).
I have been reading newspapers and watching news on television long
before CNN was in business. A big percentage of advertising money for TV
and magazines and newspaper has always come from oil companies, car
companies, banks, and insurance companies. So who's side do you expect
them to be on?
By the way, the stupid person who gave all that money to his bum
neighbor and his pals, was in fact you. But in real life you get to work
extra hours and retire later to pay for it in the form of taxes with
added interest for the rest of your days, while the bankers and
politicians and auto executives, and their kids and grandkids, get to
have lives of luxury and ease.
I am just a peon and one of the hundreds of millions of unimportant
Americans, so what do I know?
good night,
and good luck.
by
Phil Staudt
March 29, 2009
The
Phil Staudt Blog
   
"Geithner
Says Banks Need to Take Risks to End Slump "
BLOOMBERG March 29 By Ryan J. Donmoyer
U.S. Treasury Secretary Timothy Geithner said that for the U.S. economy
to recover from the recession, banks need to show more willingness to
take risks and restore lending to businesses. “To get out of this we
need banks to take a chance on businesses, to take risks again,”
Geithner said today on the ABC News program “This Week.”... The
Treasury Department has about $135 billion left in bailout money for use
to help end the crisis. He declined to say whether the department will
ask Congress for more funds...read_article
"Geithner
won't say if more bailout money needed"
REUTERS Mar 29, 2009
Reporting by Glenn Somerville, editing by Maureen Bavdek
..."We have roughly $135 billion left of uncommitted resources. The
rest is out the door," he said on ABC-TV's "This Week with
George Stephanopoulos" program... Congress approved $700 billion
last fall for rescuing banks... On the ABC program, Geithner would not
specify whether he expects to ask Congress for more money this year,
though he did not rule it out...read_article
"Geithner
defends moves to prop up U.S. financial system"
MARKETWATCH March 29, 2009
...Treasury Secretary Timothy Geithner said there remains
"roughly" $135 billion in funds uncommitted under the
government's Troubled Asset Relief Program, which aims to stabilize U.S.
financial institutions. He wouldn't rule out approaching Congress for
additional TARP funds... "We need banks to take chances, we need
them to take risks again," he said...read_article
"Geithner's
guessing game of bailing out banks"
POCONO RECORD March 29, 2009
By DAVID WESSEL WALL STREET JOURNAL
...Today's worry is whether banks will be willing to sell. That's a bit
startling, since not so long ago we were led to believe that banks were
desperate to rid themselves of these assets. Geithner's hypothesis:
"Part of what is making it hard for banks to get rid of this stuff
is the absence of a market with financing in which to sell it."...
And if it doesn't work? There is but one end game: Take out the
shareholders, eliminating what currently amounts to their option that
the bank someday will be healthy; kill the weakest banks; and spend
hundreds of billions of dollars more in taxpayer money to rebuild the
banking system...read_article
"Geithner:
$135B left in bank bailout fund"
ASSOCIATED PRESS March
29,2009
Treasury Secretary Timothy Geithner (GYT'-nur) says the government has
about $135 billion left in bailout money for struggling banks. Geithner
says the Treasury has the money on hand and is not yet committed to
specific banks. He says the estimate is based on a "conservative
judgment" and is based on an expectation some banks would return
some of their share of bailout money...read_article
 Tags: bailout bailout
Geithner Geithner
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