In retrospect: that $700B was as dumb as many of us thought it was

[sampsonblk]

Back in late September, we were told the global economy would collapse into chaos if congress didn't rush through a massive bailout plan by the end of that particular week.

Now we need a bailout from the bailout. Where is my damn tax money? What was it used for?

[snowbear]

1. Where are the forms to fill out?

.
.
.

We can have a DU Bail-Out Party! ~~

[napoleon_in_rags]

2. You may find out in 35 years.

When vast networks of sentient supercomputers reconstruct history to figure out what the hell was going on in these times. Maybe that's when history will positively judge Bush: Oh, we get it, we had to channel the money through the banks to pay off the extra-terrestrials to prevent vast planet wide schizoid embolism... ;)

[BzaDem]

3. I think most economists still think the financial system would have had a meltdown were nothing to

be done.

The purpose of the bailouts were to recapitalize severely undercapitalized banks to prevent them from failing. While it would have been nice to have all of that money be used to increase lending, the real purposes was to shore up the banks to prevent their collapse. That was what was done, and the nations' banks haven't collapsed.

[pnwmom]

4. How do we know how bad things might have gone? As I recall, it was very clear

even then that that $700 was just the beginning.

[sampsonblk]

22. That, in my opinion, is eq. to begging for bad government (nt)

[Zynx]

24. No. Basing policy off of populist notionalism is begging for bad government.

[RandomThoughts]

5. The biggest problem with it

was it crushed separation of powers.

If it was true they needed money, they should come to congress with where and how they would spend it, in detail, and open to review.

Then each spending, could be passed or rejected.

The plan that happened was just giving treasury a huge amount of money, to spend how they wanted, removing the constitutional role of congress over the purse strings.

Regardless if it was needed or not, it was an executive power grab.

[sampsonblk]

6. How about a congressional power give-away...?

Once Bush initially pressed for it, it was our party in Congress that took the ball and ran with it. If anything, it was a congressional power give-away. Its so absurd, that its difficult to describe the thing. A perfect example of bad government.

[Hippo_Tron]

27. Delegation of authority to the executive branch happens every day and should

Otherwise some idiot congressman from podunk who happens to be a committee chairman will stifle important government actions because they happen to negatively affect his district.

There should have been far more oversight, however, and a way for congress to reign in Paulson's purse strings if necessary.

[stray cat]

7. Its also clear the economy is as bad as others thought it was

even though some thought it was an act

[sampsonblk]

9. Absolutely not

Four months ago, we were told that we'd be in a depression within the month if we didn't give up $700B immediately. I don't recall any October depression. Where is my money?

It turns out, we could have waited a few more weeks and got a real package together to address the problems. Instead we threw money away and the problem remains.

[Zynx]

13. We've lost 1.5 million jobs in three months.

That's pretty damn bad. However, it could have been worse. Bank Libor spreads have narrowed substantially. Capital ratios are improved. States can borrow again due to increased stability in the commercial paper markets. There have been improvements in the credit situation between TARP and Fed actions. Just because the situation is bad does not it wouldn't have been worse. If the commercial paper market had frozen up, not only would companies have failed left and right, state governments would have been paralyzed and would have had to lay off tens of thousands of employees. Granted that has more to do with Fed actions, which have been reasonably effective, but people are bitching about Fed actions too so I felt I might comment on that one.

Also, the government does have shares in these banks, provided that they don't fail so the money there isn't gone. The major problem with TARP, in my mind, is that there was no oversight or control of the money and there weren't sufficient concessions from the banks as to what they would use the money for.

[Thrill]

8. I believe only half of it has been used. Lets see what Obama does with the other

half. Hopefully something for the Homeowners

[PVnRT]

10. Yeah, I regret supporting that at the time, however reluctant that support was

It should have been stopped. The banks are not unfreezing credit, which seems like the prime motivator for that bailout in the first place.

My first act on Jan. 21st would be to tell them "Start making loans and using the money right, or we'll amend that law and not disperse the other $350 billion." Something tells me that won't happen, though (with more blame going towards Congress than Obama).

[sampsonblk]

12. I am on board with that

I think you are 100% right.

[Zynx]

15. My only problem with TARP was that there weren't enough controls on it.

There should have been a lot more controls and requirements. The credit system was completely frozen. It is slightly less frozen, but not nearly enough, certainly not enough given how much capital we have infused into these companies.

[lonestarnot]

11. They should have known better than to put bushitlers in charge of the penney bank. They only had 3

more months to stall them. Oh well, not good at time/penney management I guess

[Kurt_and_Hunter]

14. Logically wrong

The argument you put forward is 1) they said if we didn't do this something terrible would happen, 2) we did it, 3) the terrible thing didn't happen.

How does that lead to the conclusion that it was a waste of time?

The crisis the bailout was intended to address was not low economic growth, it was the threat of credit markets freezing to zero.

The situation it was intended to address is better today than it was at the time.

That doesn't prove it worked but it's a poor starting point for an argument that it was useless.

[Zynx]

17. Exactly. Granted, I think the Fed deserves more credit than Treasury, but the

actions in total have made the situation better than it was. I think some people don't realize just how large the problem was. Ironically, they seem to be free marketeers and are saying "let it all collapse" while supposedly talking about social justice. Those two don't go together.

[sampsonblk]

19. No, thats not my argument

My argument is that we were told there was an impending collapse and we had to enact that particular plan immiediately, to solve the problem. No debate. Just pass it now or else.

It turns out, the problem has not been solved. The economiy is still facing disaster. And on Cap Hill today they are discussing an entirely new effort to do what we were told had to be done in Sept/Oct - or else.

So we got a plan rammed through in the fall with virtually no oversight included. Not only do we not know exactly what the money accomplished, we don't even know exactly where some of it went.

[Zynx]

21. What we were facing was a different form of disaster.

You have to differentiate financial crises from economic crises. We were in the midst of an unprecedented financial crisis in September and October. That has largely passed to the extent we are no longer facing the potential disappearance of virtually every major bank. The economic crisis is a persistent decline in employment caused by weak economic activity. That needs a stimulus program that involves actually expenditure to boost investment and consumption in the economy. The bailout was to mitigate the freezing of credit.

Also, the Treasury money is not gone. We do own shares in the banks now. Those do have value. It's true, we have no oversight for whether they increased lending or did anything productive other than repair their reserve ratios. That's a different story. However, the government does have a claim on these companies, though I wish we had negotiated voting shares and seats on their boards.

[Kurt_and_Hunter]

23. The bailout was not intended to fix the economy

The crisis was specific to aspects of the credit markets.

It wasn't offered as a fix for economic growth or employment. Just as something to prevent a credit freeze that would have driven growth and employment down even lower than the recession that was already baked in the cake.

Everyone said at the time that a further stimulus package would still be needed in 2009.

[Zynx]

25. Indeed. At the time every proponent of TARP acknowledged that the economy would still

go through a '73-'74 style recession. No one ever promised a quick turnaround in the economy.

[Raineyb]

28. Except for the fact that credit is still tight, the banks are not disclosing what the did with

the money, and when it is disclosed we did out they've spent it on frivolous bullshit and mergers (which is exactly what we DON'T need) that bailout was a raging success.

We will not fix this economy unless we do something about demand and more supply side bullshit is not going to cut it.

Regards

[Barack_America]

30. I think you misinterpreted "the problem".

In fact, the economy faces numerous problems, with credit market solvency being just one.

A frozen credit market had the potential of bringing the entire economy down, but that doesn't mean that there aren't other problems that can do the same.

[Teaser]

16. eh, no.

Paul Krugman does not agree.

And it seems to have stabilized the credit markets to some degree. They aren't locked up as tight as they had been.

[Jennicut]

18. Won't Obama have almsot half of it to spend as he wishes?

I think Paulson only spent half. Problem was not the bailout, it was just that Bush was in charge when it happened. He can't do anything right.

[sampsonblk]

20. Yes and no

My understanding is the same as yours: Obama will have the rest of the money at his admin's disposal.

The bailout came from the Bush administration. It didn't just "happen." Bush did it. With the help of our party leadership. Bush asked, and our party leadership busted their butts to give him the money as soon as possible.

[Occam Bandage]

26. The credit markets are healthier now than they were at the time of the bailout.

In September, it looked like the credit markets were going to freeze completely. The bailout passed. They didn't. That is not proof positive the bailout worked, of course, but that's something you might have wanted to address.

[Barack_America]

29. What exactly were you expecting?

What would have, in your opinion, proved the bailout to be a success?

[ejpoeta]

31. personally, i think they could have saved the middle man aspect.

how much would it have cost to just help the damned homeowners in the first place! then the banks wouldn't have had the bad assets on their sheets that we supposedly needed to bail them out for. that way they wouldn't have hijacked our money to hoard in their banks and not lend to anyone. we still end up having to help the homeowner's anyway, it seems. but the big banks got to rob us blind first.