TO BAILOUT OR NOT TO BAILOUT, THAT IS THE QUESTION
Maybe I should just bail out.
$700 billion. Large number. Assuming a 300 million population, that works out to about $2,333 per person in the US.
Now I don't know about you, but I just don't have that kind of cash to give to my banker. Or a broker. Or anyone else.
My daughter has five kids plus a husband. That makes seven. Times $2,333 equals $16,331 for her family. I feel sure she has other needs that that could go for.
And everyone in the US also has better uses for that cash.
And, wait. You are not going to get a chance to direct where it goes. But, you are going to pay it out. Or your kids are. Or your grandkids are. Or their kids.
That is seventy months of the Iraq war costs. Five years and eight months worth.
My nephew sent me a forward of an e-mail he had received regarding the AIG bailout. That one was worth only $85 billion. The guy that wrote it was a pretty poor calculator. He had calculated that about 200 million adults live in the US. And then divided the $85 billion by the 200 million and came up with the staggering sum of $425,000 per adult--actually it works out to $425. Still a fair little bit, that is groceries for my wife and I for about a month and a half. Or gasoline for about two and a half months.
But putting aside for a moment the enormous amount of money, does it make sense to bail out all these firms?
A person saves his money, borrows some more and goes into business. The only reason he does so is to provide a profit that he can retain for his enjoyment. He has responsibilities, primary of which is to pay off that loan he got to start the business. Once that is done, he is free to pocket his profit. If he makes bad decisions, he loses money, and his business folds. And the creditor is out the amount left unpaid. The capitalist system.
Nowhere does it say his customers must come up with the cash to make his business break-even or profitable. That is a risk of doing business. When I overspend my income, I have never found the rich uncle to bail me out. I have to suffer for my bad decisions. What makes them any better than me? Or you?
Of course I don't want the system to fail. But it was not me that made the decision to make bad loans. I do not bet on whether or not twenty million poor credit risks will be given loans for overinflated housing prices. Or whether they will repay them. Common sense has gone out the door while unabashed greed walked in and took over.
And yet they want me, whose basic source of income is Social Security, to bail them out. I already have to pay income taxes on that Social Security check. Now they want to take more of it to give to poor businessmen, businessmen who make more in one hour than I receive in an entire year.
Ethics has no apparent place in the world of business anymore. I could see that coming forty years ago when the MBA's took over from the seasoned executives, when the education received in four years in college was no longer appreciated, but the quickie specialization in how to wring the next dollar out of a business became, not the goal, but the overriding concept. Do whatever is necessary and screw the stockholders, the workers, the public, the government, just produce more and more obscene profit so the pockets of the new executive corps can be lined and relined again. Get that golden parachute from as many companies as you can, and to hell with how you go about it. Or who gets destroyed in the process.
And beginning in 1993 and continuing until this day, that has been the primary thrust of business and it has penetrated into the government as well. Otherwise why would a person spend millions of their own money to gain a seat that pays only a couple of hundred thousand a year? Clinton and Bush baby are as alike as two peas in a pod in this regard. I have no respect for either of those jerks.
Aint deregulation great?
There aint no such thing as a free lunch. Proven over and over again. And no hope on the horizon with the two that are running for president--again. Unless you are the lead dog, the view never changes.
$700 billion. Large number. Assuming a 300 million population, that works out to about $2,333 per person in the US.
Now I don't know about you, but I just don't have that kind of cash to give to my banker. Or a broker. Or anyone else.
My daughter has five kids plus a husband. That makes seven. Times $2,333 equals $16,331 for her family. I feel sure she has other needs that that could go for.
And everyone in the US also has better uses for that cash.
And, wait. You are not going to get a chance to direct where it goes. But, you are going to pay it out. Or your kids are. Or your grandkids are. Or their kids.
That is seventy months of the Iraq war costs. Five years and eight months worth.
My nephew sent me a forward of an e-mail he had received regarding the AIG bailout. That one was worth only $85 billion. The guy that wrote it was a pretty poor calculator. He had calculated that about 200 million adults live in the US. And then divided the $85 billion by the 200 million and came up with the staggering sum of $425,000 per adult--actually it works out to $425. Still a fair little bit, that is groceries for my wife and I for about a month and a half. Or gasoline for about two and a half months.
But putting aside for a moment the enormous amount of money, does it make sense to bail out all these firms?
A person saves his money, borrows some more and goes into business. The only reason he does so is to provide a profit that he can retain for his enjoyment. He has responsibilities, primary of which is to pay off that loan he got to start the business. Once that is done, he is free to pocket his profit. If he makes bad decisions, he loses money, and his business folds. And the creditor is out the amount left unpaid. The capitalist system.
Nowhere does it say his customers must come up with the cash to make his business break-even or profitable. That is a risk of doing business. When I overspend my income, I have never found the rich uncle to bail me out. I have to suffer for my bad decisions. What makes them any better than me? Or you?
Of course I don't want the system to fail. But it was not me that made the decision to make bad loans. I do not bet on whether or not twenty million poor credit risks will be given loans for overinflated housing prices. Or whether they will repay them. Common sense has gone out the door while unabashed greed walked in and took over.
And yet they want me, whose basic source of income is Social Security, to bail them out. I already have to pay income taxes on that Social Security check. Now they want to take more of it to give to poor businessmen, businessmen who make more in one hour than I receive in an entire year.
Ethics has no apparent place in the world of business anymore. I could see that coming forty years ago when the MBA's took over from the seasoned executives, when the education received in four years in college was no longer appreciated, but the quickie specialization in how to wring the next dollar out of a business became, not the goal, but the overriding concept. Do whatever is necessary and screw the stockholders, the workers, the public, the government, just produce more and more obscene profit so the pockets of the new executive corps can be lined and relined again. Get that golden parachute from as many companies as you can, and to hell with how you go about it. Or who gets destroyed in the process.
And beginning in 1993 and continuing until this day, that has been the primary thrust of business and it has penetrated into the government as well. Otherwise why would a person spend millions of their own money to gain a seat that pays only a couple of hundred thousand a year? Clinton and Bush baby are as alike as two peas in a pod in this regard. I have no respect for either of those jerks.
Aint deregulation great?
There aint no such thing as a free lunch. Proven over and over again. And no hope on the horizon with the two that are running for president--again. Unless you are the lead dog, the view never changes.
posted by tanstaafl | 12:12 PM
6 Comments:
Once upon a time in this country - as it still is in a lot of European countries - a person who need to buy something or shall we say, wanted to buy something had 2 choices. Save up the money and buy it, or don't buy it.
Henry Ford was dragged kicking and screaming to allow credit. Sears used to say right in their catalogs that buying on credit was folly.
I give those examples to illustrate how things have changed. As you say, the ethics, or lack there of in business today is beyond the pale. The way I understand this whole situation is that in order to get more money rolling in, bad loans were made and packaged up into bonds that were known to be a bad risk. The company making the loans, made money when they sold the bonds and (in great short term thinking) never cared to recognize that you can't get money from a turnip.
People who don't have money, CAN'T afford to buy a house. People who don't have a job should not qualify for $500,000 home loans. The public companies that made these loans took a risk as did their shareholders. The shareholders by voting in the board members, the board members by voting in a ceo that obviously was not capable of doing the right thing fiscally and they are the ones to whom the risk falls if they fail. You know there are a lot of companies still today that don't use debt as a tool for their business. They keep HUGE cash reserves around for the minor hiccups in daily revenue flow. I listened to an interesting explanation about "commercial paper" the other night and found myself thinking, "what if they just didn't buy it or didn't expand until they could pay for it in cash", they'd never be in that situation.
No one ever said you have the right to happiness. To a secure job, to healthcare, to any of the myriad things that people THINK they have a right to. By our constitution you've got one there - the right to PURSUE happiness. If you fail, it's on you.
I think businesses that don't do the right thing should take what's coming to them. I don't feel it's my job to have a huge tax burden laid on me or give people who were obviously asleep in the regulatory capacity a blank check to do with as they will.
Yeah I've seen what's happening to my 401(k). For me, I've got a long time before I have to dig into it. I'll ride it out. I wrote to all my congress critters and told each one that if they voted for this thing I'd do all I could to see that they never went back to DC in a representative role. Capito was the only one that listened. I'm sure my email didn't change they way, but maybe a number of them coming in did.
I can't abide the idea of nationalizing the banks and all the other things that are happening right now. I saw the drop, and while some my think it mean or naive of me to do so, I thought, well, maybe it's time for a wake up correction that will get all the inflated values out of the market.
I remember when 1500 was a high. Yeah I'm that old.
Banks: They charge you to keep your money there for safekeeping,they charge exorbitant overdraft fees, they issue credit cards where the interest rate can go up if you're late paying another bill that has nothing to do with your credit card... Why am I supposed to sympathize with them?
Investment places: They charge you to take your money, then they offer advice where you don't know if they're working for you or for them. ... Why am I supposed to sympathize with them?
Or am I missing something here?
And today we hear that yesterday's bailout bill was loaded with provisions to divert money to the Democratic Party's favored interests. And the people pushing the bill the hardest were the same ones that created this mess. Why are we supposed to believe them?
Blast it all to heck and back...Daggone it, you beat me to the punch......To h-e-double toothpick with it, I'm still gonna put my two cents worth in on my own blogsite.......
By the way, you are right on, as usual...do you ever get tired of being right? LOL....Hahahahahahaha....
Before I read any of the comments let me say that I did not expect such a rapid response, nor the volume. I guess people really do watch my blog. Hell, I mught even start doing a little more of it with reaction like this.
Now to read and see what is on YOUR minds.
Thanks to you all. You tend to restore my faith--a little of it anyway. I look forward to your blog Kelsie. Mike, you do a good job of analysis, probably better than mine. And Jim, I can't answer your questions. I guess everyone has to figure it out for themselves.
And this will probably not be the last one on this topic. Just like Congress, I can't get over it in one hump.
Again, thanks guys and gal. It is time for me to take a look at the market.
All time point drop yesterday and best up movement in the past six years today. What do you think, Hootie, aint it wild?
Hootie says he wants to go into the no-fly zone in Washington and --no, Hootie, you cannot do that on the Capitol, dang it, they'll charge me for the cleanup.
Can't you keep that darn owl under control? I swear I saw him flying around at the soccer game tonight...I tell ya, nothing like watching 6-7 yr olds charge around a field after a soccer ball without a care in the world other than kicking that ball to make you realize life DOES go on, regardless of what the morons in DC do.
By the way, Shellie's team kicked butt tonight----they won 9-4......
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