RE: Clinton, Rubin, Summers & Greenspan, LP - 10/22/2009 6:29:15 PM
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DedicatedDom40
Posts: 350
Joined: 9/22/2005
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quote:
GM filed for chapter 7 bankruptcy protection. They reorganized and kept going. They never needed the bailout money. Donald Trump has filed for chapter 7 and he is still going strong. I'm not saying we should file chapter 7 or 13 as a matter of course but it is a system that allows for the continuence of business. The bailout money was wasted. The government needs to get the hell out of free enterprise and let it do what it does.
How many banks had sold derivatives on whether GM would go bankrupt or not? And when GM did go bankrupt, those people (hedge funds, some of them foreign-based) who had placed legal bets, gambling on whether GM would go bankrupt or not, deserved to get paid. When those additional people stepped up wanting to be paid for winning their bets, the banks had no 'there' there to pay those bets. So the banks sucked alot harder on the taxpayer tit to pay those bets off. Does it really matter to make a stink about taxpayer money going to GM when, if not taking that course of action, the money only goes to the banks that bet on GM's failure and who, right now, cannot pay on their betting debts and need the government to pony up those payables for them?
As you say, bankruptcy proceedings can be 'cleansing' for a company. But now, thanks to unregulated OTC derivatives, we have $500 trillion dollars worth of bets on many thngs, including whether corporate bankruptcies will occur or not. In that case, bankruptcies are not so cleansing, if it costs the taxpayer more money to cover the bets for the banks that didn't have the reserves in place, than to actually just fix the automotive company via subsidy and thus avoid paying on the bets.
The truth of the matter is we are much better off subidizing the auto company than subsidizing the banker's bets. Subsidizing the bets costs us more and gives us taxpayers nothing in return. Some of the money (the portion payable to foreign betters) goes right out of the country. Subsidizing the auto company costs less and gives us a rebuilt and streamlined company that gives us jobs and payrolls in local towns.
You are going to see the government intervening to save companies simply because the cost of subsiding the bets which are based on the company's failure will cost us taxpayers bigger bucks (producing no bang) in the long run than whatever the cost of simply subsidizing the company in the first place would be. Since the banks are staring at empty reserves, the triggering of additional derivatives do nothing but magnify the loss to the taxpayer, so the plan of action is to keep those derivatives from triggering.
When Obama subsidizes the mortgages of McMansion owners, he is trying to avoid the triggering of derviatives that cost the taxpayer a hell of alot more than the actual cost to keep those mortgages from default. He is not doing this to subsidize the McMansion owner, he is doing that to SAVE, on behalf of the taxpayer, those bigger dollars that become payable when the McMansion owner defaults, thus triggering need for the bank to pay off on their bets.
This lack of regulation over Wall St's betting parlors has backed us into this corner of intervening and handing out pocket change to avoid paying big dollars later via the banking system - if we want to save our banking system and everybody's nest egg on Main St. To date, we have given more taxpayer dollars to the big banks who ran betting parlors, than to the little guy on Main St or to the little banks that went bust over upside down loan portfolios. That is no coincidence, as it costs taxpayers alot more when it gets to the later stage of triggering derivatives.
I think alot of us little people have a certain level of bravado, when sitting behind our keyboards, about letting the 'piggy banks' fail, but many simply don't have a clue as to how such an event like that will negatively affect their daily life. They are giving that no thought.
The truth of the matter is Main St was sleeping while Wall St put one over on us, designing a system where saving our future is tied to saving their future. That is purely our fault for allowing that to be put over on us. But what did we know, we were drunk, buying big houses, riding the crest of several bubble economies, clamoring for deregulation of everything, and allowing "too big to fail".
< Message edited by DedicatedDom40 -- 10/22/2009 7:12:09 PM >
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