Remember that rush to pass the largest bailout in the history of the United States, in which Congress agreed to hand over $700 billion to the treasury secretary without any oversight? Remember how it had to be wrapped up right away so that the government could begin buying up the "toxic mortgages" of teetering banks?
Never mind. Treasury Secretary Henry Paulson today confirmed the government has given up on that idea, and will stick instead with Plan B, buying ownership stakes in banks.
Says the BBC:
However, many analysts said he was right to backtrack on the plan to buy up the bad debts, saying it was difficult to see it being workable, and that simply buying up more banking stock was more straightforward.
But if it's difficult seeing it workable now, why wasn't it seen as difficult working when the plan was passed by lawmakers, anxious to get out of town before the election?
The Newark Star Ledger editorial today tackles that question:
Fairly or unfairly, the impression was one of haste by Bush administration refugees from Wall Street looking out for their former (and perhaps future) colleagues in the battered financial industry. It's an impression reinforced now by news that the bailout process has produced a little-advertised tax windfall of up to $140 billion for U.S. banks.
And, yet, history seems about to repeat itself, but this time the Democrats are in charge. They're calling for emergency aid to automakers. Workers in the auto industry are to the Democrats what bankers and stock brokers are to Republicans.
Paulson appeared to rule an auto bailout out, today. Last night on Charlie Rose's show, Bill Ackman, the hedge fund manager who seems on the verge of trying to take Target Corp. apart, made some interesting arguments for forcing the automakers into bankruptcy. He said taxpayer money would just be spent paying the interest on debt the companies acquired six years ago, money the automakers have long since lost. Bankruptcy would turn the company over to the banks (which essentially own it already) and allow a mechanism for it to survive in better long-term shape.
Unfortunately, Rose's Web site hasn't posted the video yet. It was a fascinating dissection of the economic crisis. Equally unfortunate, Rose ran out of time just as he was about to turn to Ackman's intent with Target.
Many people saw this coming a year or more out. Some of them are very savvy on what the market can do and what it needs. Surely, in the last 6 weeks, we could have gotten together the people who have contemplated this for a long time and formulated a strategy that would be successful.
This constant winging it is a terrible waste, and as such will only make things worse. The economy rebounds with great strength after a recession largely because of the restructuring that occurs. All the talk so far seems to be directed at preventing any pain, meaning there will not be a restructuring. The same old people and ideas that created this mess will be allowed to continue.
If you take the growth in the economy from 2001 to the present and factor out government deficits and net withdrawals from home equity, the result is a consistent contraction of about 2% per year. We never recovered from that recession - because we never really restructured. We must not make the same mistake again or the next recession will be worse yet.
>>And, yet, history seems about to repeat itself, but this time the Democrats are in charge. They're calling for emergency aid to automakers. Workers in the auto industry are to the Democrats what bankers and stock brokers are to Republicans.
Pete Townshend got it right. Meet the new boss. Same as the old boss.
I, for one, am glad they have decided to buy equity rather than bad debt.
I also agree with Eric, that we can't put off the pain any longer.
And, Johnny Zoom, I missed the fighting in the streets. When was the fighting in the streets?
I consider myself to be very liberal , and I am appalled that our elected officials would even consider bailing out the car industry, which has had its head in the sand for lo these many years. I say let them go bankrupt. We are going to have to bite the bullet one way or the other, and I for one would like to get it over with.
Really P.O.'d at the non oversight of the bailout, too!
Carolynn, you are not alone. The question of a Detroit Bailout is definitely dividing the Democrats - the first fight is likely to occur before Obama is even inaugurated. Whaddaya know.
The divide on this issue is serious and so far under-reported. The assumption that where goes Pelosi, so goes the party will be shown to be false.
//so goes the party will be shown to be false.
and Mitt Romney wins Michigan in '12
> and Mitt Romney wins Michigan in '12
Exactly. I'm not sure who will win this fight, but if Detroit goes under after a nasty intra-party battle the consequences can look ugly. My hunch is that Obama will find a way to avoid such a thing, but to have a fight looming this quickly is pretty scary.