$700 billion bailout–how are we doing?

The bailout isn’t going well from my perspective.  Paulson is making stuff up as he goes which is pretty much what he told Congress he wanted to do just prior to the legislation passed granting him authority to spend the first $350 billion of the $700 billion bailout. 

Henry Paulson has a lot of control and no real accountability for how this money is allocated.  If he’s right, then we–the taxpayers–might benefit.  If he’s wrong, oh well–it sucks to be us.

Back when this “program” was sold to Congress, a big portion of the plan was to buy up “toxic assets”–mortgages that had gone bad and created a liquidity crisis of historic proportions. 

Today, Paulson announced that he’s decided to go in a different direction and not buy the toxic mortgage assets.  Huh?  This was at the root of the crisis just a few weeks ago.  Now, it’s no big deal?  What’s wrong with this picture?

The markets are in a turmoil over Paulson’s sudden change in direction.  Buying the “toxic assets” was the core rationale for the bailout.  This latest Paulson decision seems to be nuts.  Wall Street agrees.  Main Street has to be asking if Paulson really knows what he is doing. Or, is Paulson like the Wizard of Oz–the guy behind the curtain making adjustments that may not matter?

AIG, the insurance giant, was to be the beneficiary of an $80 billion bailout.  [Note: This $80 billion is NOT part of the $700 billion bailout.]  This week, AIG needs another $40 billion.  Really?  Are we sure?  Of course not.  It should be noted that the former president of AIG, Hank Greenberg, stated that he could have saved the company with $20 billion.  He didn’t get the chance.

The auto industry is falling off a cliff.  They’d like an additional $25 billion over the already committed $25 billion.  And, what does this do?  Give them cash which they will blow through like a cocaine addict blows through cash.  We can’t bail them out unless there are systemic changes to correct the auto industry business models that simply no longer serve them or the consumer.  You can’t keep throwing good money after bad.

One of my consulting colleagues up in New England tells the lobster fishermen are loosing their butts this year as the current market price is $3.50 a pound, less per pound than I’m paying for hamburger to add my dog’s food out West.  Yikes!   My colleague claims they may be looking for a bailout. Why not?  Will a billion do it?

What do you think?  Democrat Dave


One Response to $700 billion bailout–how are we doing?

  1. culturepress says:

    You’re absolutely right–there’s no accountability or direction whatsoever with the $700bil bailout. Paulson’s practically making it up as he goes along. And this $25bil for the auto industry is unacceptable. I understand the mortgage industries and the credit markets, why we had to consider “rescuing” those industries in order to salvage our economy. But the automakers? No way. The public should be outraged at the mere thought of that.


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