Jon Stewart's Economic Plan - Trickle Up

What did it say exactly?

 

Fixing the economy is not a matter of tax cuts, giving poor people money, or anything like that at all.

Any idea that consists of giving poor people borrowed or printed money and than saying, "aha GDP is bigger therefore the economy is better" when it really isn't better because its all borrowed money with interest while American businesses aren't actually selling anything more in the world market to recoup the debt we're sending abroad is a bad idea.

 

I remember hearing him propose this to Gwen Ifill on his show and thought it sounded like genius. Because the logic seemed so good to me, I figured Jon and I must be missing something. Were we?

 

The supporters of the bailouts are going to tell you that Jon Stewart's plan is going to cost eleventy hundred billion dollars with no chance of a return, while the bailouts only cost eleventy hundred billion dollars up front, and they stand to not lose very much money or maybe even make money. The truth is that the odds of not losing most of the eleventy hundred billion dollars is almost nil, but they'll argue it until they're blue in the face.

 

Sounds amazing in theory but like most liberal ideas it fails in practice.

Essentially you are asking the government to co-sign and guarantee the bad loans made by people in this country. This removes any future incentive for both the borrower and lender to make sound financial decisions. Our society is based on consequences for bad behavior and government insurance of debt takes away accountability.

Keep dreaming this utopian fantasy of no personal responsibility!

 

The problem with this is that the people that keep arguing that it will lose most of the ability refuse to actually engage in the math involved, while the people that argue the opposite actually show it through actual numbers.

I would love to see the assumptions you used to make the TARP program lose virtually all of the money involved. You can even pick how to spend the remaining 50% that hasn't even been allocated yet.

 

Unless there's a complete collapse of the banking system where virtually all of the banks become insolvent, how is the government not going to recover the preferred stock investment in the banks? The government is even receiving quarterly dividends from these banks.

 

That is exactly why the banks shouldn't get TARP money. Nationalization baby...

 

Try explaining to me why

Bank of America
has gone from $30 (time of TARP Bailout) to $5

JP Morgan
$50 to $25

Wells Fargo
$35 to $15

The Banks are losing value every day and still can't solve their financial troubles. The TARP money is being used to make either acquisitions or writeoff losses. The liquidity problem and lending have still not been addressed even after spending $250 Billion.

You claim about dividends even though the underlying asset has been losing value since purchase. I would love to know what is market value of the government preferred stocks today?

 

Except for ...

1. The liquidity problem has dramatically improved
2. The lending problem has improved somewhat
3. There's not daily fear about what bank is going to disappear this weekend
4. The TARP wasn't meant to make banks healthy in 4 months - it was meant to prevent total collapse.
5. The preferred shares and common shares don't always move together (for example, Wells Fargo Preferred is about the same as it was in October despite the common shares falling. Assuming the preferred shares were issued with new terms specific to the government, I'm not sure they are necessarily trading or have a useful comparison market price right now.
6. In many cases, the common shares have fallen in part because the dividends were cut or eliminated, reducing the value of the shares. In other cases, there is concern that common equity will be further diluted or eliminated with future rescues and TARP usage. None of these are as relevant to preferred shares.
7. The government doesn't care what the preferreds are worth today. The point is to sell them when the financial system heals.

 

I'll do this tomorrow. I'll ignore the 1/2 that hasn't been spent.

 

You can't neatly separate between a good debtor against a bad one. Trying to bail out crisis debtors would encourage formerly good debtors to stop working as hard or even pay their bills. Bailing all debtors out would be a slap in the face who did act responsibly,...assuming we can afford and plan the long term logistics of that insanity.

Plus expected losses from the banking industry are way over 2 trillion bucks. It might be as bad as 8 trillion, IIRC.

 

The supporters will also tell you, with a completely straight face, that Stewart's proposal is extremely unamerican.

Makes me mad/sad.

 

Jon Stewert is right in a lot of areas there.

DD

 

I just watched it last night, and the fat guy is esentially on the same page as me. Just cut the payroll tax. Put more money in the taxpayers, and the company's hands.

 

The problem is that not all of these banks have the same motive. Obviously some are just trying to survive. The others are told by regulators to increase liquidity and they are taking the TARP funds and simply sitting on them. The last group is banks that are healthy and realize TARP is a great was to get cheap capital, the best of the three because they are willing to lend. Ultimately the stimulus is not fully effective because not everyone is going to to the thing that will help the whole but in the sake of business and survival they do what they think is best for them.

 

Still waiting...