Bank Bailout a Failure Already

New Treasury Secretary, Tim Geithner, is supposed to announce his new and improved Bank Bailout Plan on Tuesday.  Supposedly, the gist of his plan is to have private investors buy the bad assets from banks, with the US Government setting a floor for the minimum return on investment.

So, basically, the banks will be able to unload their assets on investors.  Then, when the assets prove to be worthless, the Federal Government will backstop the deals.  This results in the losses being shouldered by you and me, the American taxpayer.

First, some comments on the plan in general.  Why will someone buy these assets if the government is already setting a floor price?  Why not just buy them for that floor price amount?

Also, this plan seems to allow the Wall Street firms and big banks to get out of this unharmed.  That makes no sense.  Why do they get to unload all their bad investments, but homeowners across the country are stuck with upside down mortgages?  Wouldn’t this money be better served attacking upside down mortgages?  Those are the root of the problem.  Bailing out the banks is just treating a symptom, but not the real problem.

If you step back though, and look at this from the bigger picture, you realize that this plan is going to fail already.  There should be one goal and one goal only right now:  Liquidate the Bad Debt.  Don’t move it around, don’t artificially set a higher price for it.  Just get rid of it.

If the banks had been required to declare bankruptcy before getting government help (like was done in Sweden), we’d be on our road to recovery by now.  The pain might have been a little worse, but it would have been short lived.

Instead, we have spent the last four months throwing almost $2 trillion around, with nothing to show for it.  We might have “staved off a financial collapse,” as the pundits like to say, but who’s to say it’s still not going to happen?  The bad assets are still there, and they are getting worse!  We might have just prolonged it by four months and dug a deeper hole from which we have to get out.

Currently, the actions of the government are making a bad situation worse.  We have attacked this crisis without any sort of plan, and we have changed course too many times.  When will we learn that we are going to have to take our medicine?  Actually, the American public already has.  We are feeling this more than the elite in Washington are!  How bad do you think Geithner is feeling this when he makes enough to owe $34,000 in back taxes?  That’s a lot of people’s yearly salaries!

We have learned to deal with this recession and just want it to be over.  Instead, our leaders are trying to make themselves feel important and are trying to “save us.”  Right now, we don’t need saving.  We need the government to get out of the way and let the banks fail.  After that, the Feds and investors can step in to help rebuild our economy.  Until they let that happen, though, we’re just in for more pain, more recession, and more government failure.

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