Quote:
Originally Posted by Greg B
People now have their entire nesteggs wiped out and now we want to spend the last remaining surplus to bail out the companies that started this shit in the first place? Sounds like the cherry on top of a fuck you sundae.
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Greg, this is sort of the most misleading statement of all. Nobody is lining up to bail out the companies that started it in the first place because they want to bail out the rich and fuck John Q Public, but because there are few other ways to get it done.
The markets (stock, housing, and much of the business world) is over leveraged, entirely dependant on borrowed money. Maintaining those position is almost entirely dependant on being able to get re-financed every so often. Most of us experience this when we buy a house with a renewal mortgage.
Long story short, the companies that lend money don't have any more to lend. They have too many assets on their books that are not liquid, and they can't lend any more. So much stuff has turned illiquid at the same time (and a significant part of that comes from those horrible mortgages that have turn tits up, aka John Q Public's house).
Some people suggest "just let them go broke". Well, that doesn't work, because it ends up wiping out huge amounts of value and huge potential sources of future lending activity. Without lending, companies (most large companies work on lines of credit, credit covenants, and other financial instruments for day to day operations) won't be able to make payroll for very long. They can't buy things. Poeple won't buy houses, cars, or hardgoods because they can't get credit, can't afford it, and can't take the risk that they will be unemployed tomorrow.
So sadly, the choices are limited. The bailout as projected basically goes in there and buys up illiquid assets, and attempts to lubricate the system while companies work towards unleveraging themselves. As a whole, the US economy is too dependant on credit to operate, and many companies have gotten such a scare now that they are going to have to look at ways to operate more on their own funds and less on borrowed money.
It is signficantly more complicated than this, you have to look at all sorts of things like low interest rate loans (sub prime), companies in the last 5 years that have been bought out by taking on huge amounts of debt, companies borrowing money to invest, etc. It traces back as much to John Q Public being silly enough to think that $10 an hour wal-mart wage slaves can somehow afford a $300,000 house, using financing tools that assume huge increased in value to pay for it all. There are hundreds of issues out there.
So no, the bailout isn't to reward the fools that fucked it up, but to save ordinary Americans from the fools that fucked it up.