Tuesday, December 23, 2008

Bailouts for Everyone!!! (Except You and Me)

We're in the midst of a $700 Billion bailout of the financial system. This is a scary large monetary figure. I was against the bailout, as I am very concerned with the lack of accountability for the bad decisions the large banks and mortgage companies made. They should be punished, and the natural punishment is to fail as an ongoing entity.

The car companies are now going to be bailed out to the tune of $17.4 Billion. In the past, this would have seemed like a gargantuan amount. People would have been outraged instead of accepting of the bailout. This bailout could not have happened without the preceding $700 Billion bailout of the banks to take the heat.

Neither of those bailouts scare me the way Obama's proposed stimulus plan scares me.

Both the $700 Billion and the $17.4 Billion bailouts are being spent on "investments". In other words, they consist of loans or capital infusions for which the government receives stock or warrants. The expectation is that some portion of this money will eventually be returned to the government either as interest, dividends, or capital repayment. In the end, the taxpayers will hopefully not be eating the entire price of the bailout.

Now we have the newest proposal, now estimated at $800 Billion, but potentially rising to more than $1 Trillion. The intent of this proposal is to spend money on infrastructure and job creation. There is no explicit means for providing a return on investment. The money will be gone...spent. This is costing every single person in the country close to $3,000. For my family of four, our share is $12,000. I, for one, can not afford that kind of price tag, no matter how beneficial the result will be to the overall health of the country. Luckily, I shouldn't have to pay it all in one lump sum. But I know that I will be paying it with a small tax increase here and a new tax there. It's likely most people won't even realize their money is being siphoned away from them. Ignorance is bliss.

People tell me I'm a glass half empty kind of person. Can you blame me?


Sarah Kay said...

I heard that if they did not come up with a viable plan etc. by March that the bailout would be nullified and their loans called in. Called in? With what money? They already squandered their own money and now we have given them ample opportunity to squander mine? What makes you think they are going to be able to pay it back so soon?

Elliott said...

My understanding is that should a sufficient plan not be put in place by the March deadline, the loans will be called, effectively forcing the car company to declare bankruptcy. There is no way the car companies would be able to repay these loans by March.

I'm more worried about how they will determine if a plan is viable or not. I would hope they are pretty strict in their determination.