Bailout Double Standards

CNN ran an interesting commentary this morning by Frank Micciche, managing director of the Next Social Contract Initiative, a bipartisan think tank. Micciche's basic premise is that it's easier to get billions for banks and the auto industry than to get a small grant. "Small nonprofits and community organizations that receive federal grants will tell you that the paperwork and scrutiny that comes with even the most modest federal award is often so exhaustive as to nullify the benefits of the grant," Micciche says. "Not so, apparently, if your request is in the billions."

This is why I don't support the bailout - not so much because it isn't needed, but that it would not be effectively executed. Does anybody know where the $350 billion went that Paulson gave away in TARP I (other than executive bonuses, that is)? And with Chrysler and GM asking for another $21 Billion, do we know what they did with the $17 billion they recently got?

Too much money is going too many places with too little oversight and only a hope of success. Let the banks and automakers go to bankruptcy court and use that bailout money instead for direct support of those who lost their jobs in the meltdown.

TARP I cost over $1,150 for every man, woman and child in the country (not counting interest) and nobody seems to know where it went. The Obama administration estimates that bank bailout will cost taxpayers $2.3 trillion ($7,570 per person). And Bloomberg News recently pegged the entire cost of the all bailout funds (including banks, automakers, stimulus package and mortgage rescue) at $9.7 trillion ($31,712 per person). If you have a family of five, your family's share is $158,560. As the Bloomberg article points out, that's "enough enough to pay off more than 90 percent of the nation’s home mortgages." Here is the math and links to the numbers:

TARP I $350 billion/305,878,088 = $1,150
Bank Bailout $2.3 trillion/305,878,088 (US population) = $7,570 per US citizen
Bailout Total $9.7 trillion/305,878,088 = $31,712 per US citizen
Family of 5 $31,712 * 5 = $158,560 for a family of five

An interesting question is what would happen if the government actually did use that money to pay down mortgages? That money would flow right to the banks, making them flush with cash and ready to lend again. With the mortgages paid down or, in many cases, paid off, consumers would be able to use that mortgage money to buy cars and TVs, giving a boost to manufacturers. But most important, the US taxpayers would actually get something of real value for their bailout money.

Of course, it will never happen. And the bailout would unfairly help mortgage holders over renters, who would still be on the hook for their $31K. But at least there would be tangible, predictable results.

President Obama...Nationalize Banks At Your Peril

The issue of nationalizing banks is getting more and more attention. Within the last week, Sen. Lindsey Graham (R-SC), Rep. Peter King (R-NY), Sen. Charles Schumer (D-N.Y.) and former Fed Chairman Alan Greenspan have all suggested that nationalization should be looked at. Obama would be foolish to do so.

First, I agree with those who say that we should not rescue failing banks. There will be casualties in this financial crisis, and failing banks should be among them. We simply cannot continue to bail out companies that bankrupted themselves through unsound business practices, especially when to do so would add to the rapidly growing debt we are piling on our children. Furthermore, as near as I can tell from my research, Nationalization would be a bad idea. The best explanation of why that I have found is from the Motley Fool.

Second, if Obama nationalizes banks it will give the GOP and the RRR (Rabid Right Radio) enough ammo to really make a difference in the next election. Hannity, Beck, Limbaugh, and their servants in the GOP have already labeled Obama a socialist with scant evidence to back it up. Nationalizing banks would be the smoking gun they need and they will pound that topic into the ground.

Third, I don't think main street cares about the banks. Nationalization would be unpopular, and would be seen as just another examples of the Wall Street fat cats getting the money while the regular guys get the shaft.

Nationalization would be a long, costly process and two years from now the only result would be that those banks will not have failed. They won't have recovered by then, and will still be seen as propped up by the government. In the mean time the GOP will have made Obama look like a cross between Hugo Chavez and Eugene Debs. It will hurt the entire Liberal agenda for, I think, very little gain.

Obama has been silent on nationalization so far, so I think he understands the dangers here.