Friday, February 6, 2009

Wasting Money

We learned in a Congressional Oversight Panel report, released Friday, that the initial $250 Billion in disbursements from the bailout was a smashing success for the banks. The report states that the initial disbursements amounted to overpayments to these companies in the amount of $78 billion. That's all equity (probably non-taxable) on the banks' books. They must be thrilled!!!

Financially ailing insurance giant American International Group, which the Treasury Department deemed to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.

This makes me want to establish my own bank and immediately begin requesting funds from the government. Do you think they'd fall for that one?

One of the following happened:

1) The government overpaid on purpose as a way of propping up the balance sheets of the banks. In other words, this was a massive government handout that the treasury knew would never be paid back, despite their insistence to the contrary;


2) The government didn't know that they were paying too much. I don't know if this is the scarier scenario or not. I do think this is the most likely case, as evidenced by this quote:

In December, in response to questions from the oversight panel, the department wrote that the value of preferred stock purchased by the government was "at or near par," meaning Treasury paid $1 for every $1 dollar of asset.
"The way the Treasury secretary described it does not fit with the numbers that were produced in our much more extensive valuation analysis," panel chairwoman Elizabeth Warren told reporters Friday. "The secretary of the Treasury described it in December that these were par transaction and that is not supported by the numbers."

The fact of the matter is, whether you agree with the stimulus or not, how can you trust the government to handle financial transactions of this magnitude based on their track record? Leaving aside the persistent threat of corruption, most politicians just don't have the education or experience to deal with financial matters of this sort.

Meanwhile, the Government continues to act just like a little kid, always pushing their limits to see how much they can get away with before we, the people, get angry enough to do something. Unfortunately, we apparently haven't gotten angry enough in a long long time.

This is just another reason why I am 100% opposed to any new stimulus plan being proposed.

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