I know I've said this many times already, but people who were against the bailouts simply didn't understand the economics involved. Any politician who voted against them should be booted out of office. Government regularly screws things up, but this is one example of partisanship taking a back seat for many politicians to proper policy. You can quibble with the details, but overall, it's an example of government doing what was in the best interests of the country. At the end of the day, the government prevented a global economic collapse at a cost of ZERO to taxpayers, if not a profit.
I agree with Major. This is great news, I was under the impression initially that the AIG money was going to be lost.
A cheer for the definitive breaking of Glass-Stegall, with AIG transacting in complex financial instruments (most notably CDS) that exacerbated 2008. We can only hope for the further encouragement of this behavior. Another cheer for the untold damage the American economy and markets have suffered as a result of the folly of private market agents such as AIG. The $12 billion profit incurred is the best thing that happened since GDP slid 6% in a quarter, and unemployment skyrocketed to 10%+. A final cheer for the Americans who were foreclosed upon, because bailouts have to be funneled through large financial intermediaries, and the system has to be preserved at all costs. That there were no real alternatives considered shows that concentration of power is always a good thing. Three cheers for the banking sector, invincible, and Fed-backed. May no one ever question why JP Morgan is trading like a hedge fund with FDIC-backed accounts---or why AIG is transacting in exotic financial instruments again.
Bailouts were better than chaotic collapse, but they basically kicked the can down the road since the culprits have gotten even too bigger to fail and no meaningul constraints have been put on them to avoid another collapse.
If all of that money had been distributed to lower and middle class people, the economy would have recovered already. Those people wouldn't have just socked the money away in a bank, they would have spent it - on tuition, on repairing their cars, on buying groceries, on paying down their mortgages, on gas, on paying other debts, on utility bills, on new appliances, on their small businesses. This would have led to more jobs, and more money moving to more places to benefit more people. A lot of that money would have even made its way back to the banks. It's still amazing to me that I didn't see this idea seriously discussed in any national media. The top-down approach isn't working any more than building a skyscraper would work if we started with the top floors. It's time to build from the bottom up.
You make a good point at least wrt to mortgages. We definitely needed a bailout for the average person to cope with the banks fu**up. I think maybe a distinction should be made between the banks and gthe mortgage companies, since the mortgages after all are on real land, but the banks should have become at least as regulated as GM wrt to fat cat salaries and Glass-Siegall needed to have been reimplemented. No doubt it is disengenuous to pretend that the bailouts were unmitigated sucesses as done.
I know you're being sarcastic, but shouldn't that comment be directed to George W. Bush who actually signed TARP and the initial auto bailouts?
What money? The $0 that this cost us? If you're talking about the $700B, that would have been a one-time payment of $2,000 per person. The stimulus included tax cuts of $300B instead of $700B. Do you think doubling the stimulus while letting the global finance system collapse would have netted a better return than fixing the financial system for $0? There's a really good reason for that.
I'm not sure what you mean? It goes back into the treasury, so the government has to borrow less money the next time it needs some.
Actually, based on the aim of the policy, Treasury and the Fed netting a profit on the bailout isn't a good thing, as the intention was quantitative easing. For AIG to payback the Fed/Treasury effectively causes quantitative tightening, which they don't want. Of course, the Fed can just manipulate bond markets to put that $192 billion back into the economy, so it's a moot point. However, I'm not convinced that you're familiar enough with the economics behind the policy actions of the Fed to have an opinion on it either way.
Well, that's basically what happens because you don't borrow money you would otherwise have borrowed. It's the same thing. Spend $700B on TARP (borrow it) Spend $1T in budget (borrow it) Return $700B on TARP (goes into treasury) Spend $1T in budget (only have to borrow $300B) As opposed to Spend $1T in budget (borrow it) Spend $1T in budget (borrow it) In the end, you borrow a total of $2T either way. But in the first case, you had the TARP program.
The aim of the bailouts wasn't QE. The aim of the bailouts was simply to prevent an imminent cascading collapse of the financial system - nothing more, nothing less. It wasn't to grow the economy or stimulate spending or anything else. Those were the aims of other policies (stimulus, Fed bond buying, etc).
