Maybe I'm Just Stupid...

[JFN1]

Because I just...don't...get it.

So we've spent/will spend about $8.5 trillion on all of the bailouts combined. That works out to just under 40,000 for every adult over 19 in America.

I was watching Countdown last night, and I heard Tim Geithner, and then Mr. Obama say, "We need to do this toxic asset plan, in order to free up the credit markets and get credit flowing to working families and small businesses again."

Okay, I guess I can go along with that...except for one small part.

"Get credit flowing..." -- to...whom? And for what?

Free up the credit markets for families, so they can...what? Go buy more cheap Chinese-made crap they don't need? Get that second flat screen TV for the basement? Pay for little Susie's dance lessons? What? What?

I don't know about the rest of you, but I have never, in my entire life, felt less of a need to buy more crap I don't need, than I do right now. And if credit flowed to me, what am I, and millions upon millions of other Americans supposed to do with it?

Buy a new car, so that we can ruin our credit when we finally lose our jobs? Build that addition on to the house? Finally remodel the attic? None of this stuff seems nearly as important to me, as it once did.

Small businesses I can understand a bit more, but barely. Small businesses need credit to keep their doors open, keep goods flowing, keep employees paid. I can go along with that, no problem.

But who are the small businesses going to build products or perform services for? Mr. and Mrs. "Broke" Jones? Or does our government expect Americans to use the newly freed credit to get deeper into debt by purchasing from the small business who got their credit flowing again, too?

DOESN'T THIS SIMPLY REPEAT THE SAME PATTERN?

But wait, there's more.

I am expected to believe now, that giving bailout funds to companies like AIG, Citigroup, and so on, is going to help me in some way? That the $40,000 I now owe, and you now owe, and your wife and husband and brother and sister and mom and dad now owe for these bailouts, is going to be effective in getting the old system back on track?

I am outraged beyond belief.

And here is the real kick in the shins: I must believe now, based on all that we have heard, that giving $8.5 trillion to these big companies is a better investment in America than giving it to you and me. In other words, we are all expected to believe that these greedy fuck thieves are going to do better with this money - in the future - than they have in the past.

Right.

Sorry, I can't buy it. Maybe I'm stupid, but it seems to me that if every family in America were given their portion of the bailout funds, there would no longer be toxic assets, bad mortgages, and so on, out there, in the numbers that exist now as a threat to our entire economy. Sure, some people would act irresponsibly with the money, spend it all on hookers and weed and toys and games and fun. But the far vaster majority of Americans would look at the money as a means to dig themselves out of debt, and, I believe, would spend the money accordingly.

I also do not understand how it can be that going 50/50 on this - half the bailout funds to the companies, the other half to hurting Americans - would somehow be WORSE than what we've bought ourselves now?

HOW????????????????????????????? How could it POSSIBLY be worse than spending $8.5 trillion to revive a ROTTING CORPSE?????????????

[kentuck]

1. I think you have put your finger on the problem with this bailout...

There is the assumption that everyone will rush to get credit and buy shit. Not even companies and corporation will rush to borrow or invest. This is a windfall for the banks and will have little impact on jobs and the rest of our economy.

[OhioChick]

2. You, as well as the OP, are absolutely right. n/t

[TwixVoy]

3. Basically the plan is to return to business as usual

the plan is to (attempt) to remove all the bad debt that people could not pay that is killing the financial institutions.

The plan after that is to "get credit flowing" again right back to the people who could not pay that credit back to begin with and started this problem.

Great plan right?

[NightWatcher]

4. from the "Shock Doctrine" they are just continuing to use chaos as a cover to steal

Geithner...a big business corpo now bailing out his old pals.

"get credit flowing" is a code name for printing money and giving it to banks in the HOPES that they'll make things better for the consumer.

[Autumn]

5. I think you are pretty damn smart.

I don't get it either. And I am outraged over it.

[dkofos]

6. Your'e right. Propping up the dead banking system will do no good.

[asjr]

7. If you are stupid, I am even more stupid.

There are so many people telling us what we should do and should not do. I always suspected that some of the "bailed out" companies were telling us lies, but I didn't know they were going to be whoppers! And I always thought "toxic assets" meant asbestos, radioactive implements, etc. I didn't realize it referred to nothing more than a big hole in the ground where what we do not like is buried. And I wonder how much of those toxic assets were originally from the Republicans.

[yy4me]

8. Let me add my 2 cents worth, seeing that is all I have left!

I agree with you. Who are the big banks going to lend the money to? The ones that need it most are in debt now, so more debt is the answer?

I am getting more depressed by the day. I find myself exhausted trying to keep up with all of the things that are going on. This old lady has problems of her own, and she sure could use a chunk of bail-out money.

I must say that I resent the fact that we are now giving more those who have. I bet the last of my 2 cents that this whole thing is going to be one big screw up. I don't see the trickle down heading in my direction. Maybe it is going your way, if it is, good for you.

And since when do you allow someone who fails at their job free rein to fix things up? Fire them all and hire someone with the need and expertise to fix your mess. Someone whose greed has not overtaken his work ethic.

[JFN1]

9. "I don't see the trickle down heading in my direction."

Exactly! This is just "trickle down economics" in action...again...

[acmavm]

10. Hey, they think we're all stupid. People like you prove that we aren't.

Fantastic post.

[Brazenly Liberal]

11. um, no. freeing credit is not intended to put families further in debt.

It is, imo, a pretty narrow vision that can only conceive of that sort of result.

The idea is to free up credit to businesses that need a line of credit to operate. Without it, they can't buy materials and supplies and pay employees. This is often especially true for new startups and mom and pop operations.

Secondly, banks are intended to use the money to refinance mortgages and make reasonable loans to individuals - which can be for things they really need. Assuming personal loans are for frippery and crap is ridiculous. Family farmers use them to buy equipment, seed, etc. Small business people often use them to finance their business. (eg the nice guy selling "Impeach Bush" T-shirts at the mall set himself up by getting a personal loan.) Other people need a car to get to work and to get to town to buy toilet paper (though I'm sure you'd say we should all use dead leaves or something)

[JFN1]

14. I think it is narrow

to pin all of our hopes on the same assholes who brought us to this place to begin with. I think it is narrow to assume once credit starts to flow, the old system will kick to life again, and everything will be lovely and wonderful.

What is so great about the old system that we should spend our CHILDREN'S FUTURE on it?

[Brazenly Liberal]

18. Oh, please!

Old system, blah blah blah. Just because it's the way the entire freaking world functions, why should we? Yes, let's all go to trading seashells and broken twigs for goods and services. Starting tomorrow! Ready, steady, GO!

All this gnashing of teeth and navel gazing is very drama queenish, but it lacks a certain element of, shall we say, practical implementation potential. Do you have a better system AND a way to implement it in time to avoid complete economic meltdown? Hm?

And please don't insult me or yourself with tired old platitudes about how it's already melted down and it's already a complete disaster and any change is improvement. Really. The fact is most people in this country are living the same level of prosperity they had a year ago. Their fears of losing it all are exponentially increased, but the vast majority still have jobs, still have homes, still pay the bills. They are not about to trade it all in for seashells and twigs.

[masuki bance]

12. What's wrong with dance lessons for little Susie?

[dem629]

13. Exactly. GREAT post!

We're being ripped off and lied to by corporations, CEOs and gov't officials in both parties at all levels.

[girl gone mad]

15. Thank you.

Very well written.

Not only are we engaging in an exercise in futility by pouring money into banks that may never become solvent, there is no absolutely no guarantee that they will even lend to us at the end of this sad charade.

As I told someone last night, the bankers' fundamental duty is to maximize return to their shareholders. Sometimes, that might involve lending. Sometimes, it might involve purchasing eligible investments that have high yields. In the future, it might involve buying Samurai swords from Japan and selling them to Peruvian gangsters, for all I know. They are under absolutely no moral, financial or legal imperative to lend money to broke-ass Americans.

The worst possible outcome for this program, in my mind, would be that it succeeds in recapitalizing the banks while the broader economy remains depressed. The money will not be lent, it will instead be used to speculate on commodities or invest in emerging markets and promote "efficiency" so that more of our jobs can be outsourced.

[JFN1]

17. My once near-perfect credit

has taken a few hits over the last year. I've been late on a couple of mortgage payments, and on a couple of car payments. We had to spend $2600 to get a biopsy for my wife, to see if she had breast cancer (she found a lump - no cancer). Because we do not have health insurance, we had to pay this out of pocket, and this set us behind for several months.

So even if banks kick into lending again, what good will it do people like me, who pay their bills year after year, have one medical emergency, and BOOM! All of that scrimping and saving and being responsible means NOTHING to a bank.

I asked my mortgage company for a refinance - they said, "We can't - you've had two late payments in the last year." I said, "Yeah, but I went 7 years without missing a single payment."

The bank's answer? "Sorry..."

So guys like me, who work hard to meet their responsibilities, are going to be left hanging in the wind. So I fail to see, as you said, how resurrecting the credit markets, in this economic environment, is going to make ANY difference to working class folks.

[Autumn]

21. Same boat here.Since my Husband had to take an

early retirement and I lost my job, our finances have gone down the tube. Our only bright spot is a very small mortgage so I know we will have a place to live. If it weren't for my Son-in-law I wouldn't even have internet. You are right we are being left to hang in the wind.

[leftofthedial]

16. Every penny the Obama spends on anything that is not direct demand stimulus,

that is, money, jobs or services given *directly* to ordinary citizens is wasted.

Every cent we flush into the overflowing septic system that is Wall Street just makes our problems worse.

[Pacifist Patriot]

19. I know how you feel, and am affected the same way personally, but...

freeing up credit does enable things like start-up enterprises to obtain funds that will then allow them to provide jobs. The individual consumer and the home mortgage market is but a piece of the pie.

But you have put your finger on what I consider to be a huge problem and that is the idea that acquisition and conquest is self-sustainable on a planet with finite resources. We aren't meant to tame the earth, nor are we divinely appointed stewards. We're subject to natural laws like every other living thing on this planet. Too many people don't realize that and behave accordingly.

[specimenfred1984]

20. They have the power, we dont: it's called fascism

I been clearly stating it for years but greedy and dumbed-down "murkins" just don't want to hear it, they want huge returns on their 401ks, an entire culture of wannabe millionaires. The people have been propagandized to the point of becoming robots just waiting for further programming.

[CrispyQ]

22. My grandmother would have called it "throwing good money after bad."

They are going to try to resurrect something that will fail again. And don't think social security is safe just cuz we have a dem in office. They won't be happy until they have stolen that from us, too.

It's our money, but they call it entitlement when it's spent on us, but helping the economy when it's given to big business. Hopefully, the average American is starting to wake up to who the real welfare queens in our society are.

[JFN1]

23. I hope so.

Because right now we've bet our children's futures on it...

[njlib]

24. $40,000 would help a lot

I could pay off my car loan, student loan, credit card, and do some much needed repairs on my house. The banks would get a big chunk of it when I paid off my loans and the balance would create work for local contractors/suppliers with my home repairs. Multiply that by how many millions of people who'd do the same thing as soon as they had that cash. The banks get their money, except it trickles up, and I don't have to worry about my house collapsing on top of me! Everybody wins...so why can't it be done?

[JFN1]

25. This is exactly what I'm saying

What toxic assets would remain that could still threaten our entire economy, if Americans were entrusted with the bailout? Banks would have cash to lend to businesses again. Incomes would be freed up for normal living expenses and SAVINGS (a quaint notion these days), and the only losers would be the idiots who invested in credit default swaps (and similar nefarious instruments), since the credit would not default! They'd lose their wager money, the banks and insurance companies would keep their money instead of paying it out to the banks for the dead mortgages...seems a much better "circle of life" than the one we have now...

[HamdenRice]

26. To understand, first try to understand the chart you linked to-we didn't "give" $8.5 trillion

If everyone would try to learn to read a simple financial statement, such as the one you linked to, we would be much better educated in understanding the bailout, how much it costs, and what it's trying to accomplish.

First of all, let's look at the bottom line of the chart you linked to. You wrote in your OP that we have "spent" $8.5 trillion. The bottom line of the spreadsheet does indeed have the number $8.5 trillion.

But the chart shows that as of its date the amount actually committed was $3.1 trillion -- less than half of the number you're worried about.

The chart has two columns, "current amount" and "maximum amount." The difference is what was actually used, and what was authorized if it's needed.

That's because often, all it takes to assure a market, is for the federal government to say, "we're ready with this much money in case something bad happens."

Secondly, we have to separate what we've "spent" from what we've "invested." Look at the Federal Reserve section of the chart. The total committed is the largest portion of the bailout, and it was, as of December, $5.25 trillion.

Now how much has the Fed "spent"?

Zero dollars.

The Fed has, instead, invested or lent about $1.7 trillion. Most of this is in the form of very, very short term loans that have already been paid back, re-lent, paid back and on and on.

The biggest chunk is the "Commercial Paper Funding Facility." What does that mean? Well, commercial paper is a very important form of short term borrowing by corporations. The corporation issues the paper for money, and pays it back in usually 30, 60 or 90 days. The lenders traditionally are money market funds. Back in September, depositors in money market funds were spooked when Lehman defaulted on its commercial paper and withdrew trillions from the commercial paper market. Commercial paper is so vital to the economy that it's practically like corporations' checking accounts. Without it, they can't meet payroll, buy inventory, and so on. If the commercial paper market had remained frozen, all the layoffs that have happened since September plus perhaps two or three times as many, would have happened within one week or so.

So the Fed stepped in and began buying commercial paper, and getting paid back within 30, 60 or 90 days. As the money markets return to normal (they partially have) the Fed withdraws from buying commercial paper.

Net effect?

The Fed made billions of dollars of profit by lending to corporations. Assuming around a 3% interest rate on $270 billion for 6 months, maybe $4 billion in profit. It was probably more because the program at its biggest was, I believe, more than the amount committed as of December 2.

Look at all the entries under the Fed. They are all "loans". Most of them are overnight or very short term, so most of them have been paid back and recycled.

Under the Treasury section, the big commitments were TARP and the stimulus package. TARP, again was an investment in preferred stock and warrants in banks. Those preferred shares have already paid billions in dividends to the treasury and remain as a debt and/or ownership stake that has to be paid back. Again, it's not money that has been "spent". The stimulus package, however, was money that was "spent."

So the problem with simply mailing a check to everyone is that that would be money "spent" not "lent".

So really when you step back and look at the big picture, the banking and credit systems have collapsed, and the Fed has become our national bank, lending to crucial parts of the economy. That doesn't mean they've been giving money away.

And you don't now "owe" $40,000, as your share of the bailout. It would be more accurate to say that a large portion of that $40,000 is owed to you, and if the record so far holds, it's going to be paid back to you, as taxpayer, with interest.

[Orwellian_Ghost]

27. Maybe you're not

Rich people approve of using taxpayer money to help rich people.

K&R