Profiting from the bailout

September 23, 2009

What is it with this belief that somehow the federal government’s role should be to profit from the bank bailout?

I thought the purpose of the bailout was to save the financial system from collapse.  And that’s why I supported it last fall–even if it was poorly designed and poorly explained to the public.

If the government could somehow make money on its capital infusions, so much the better. But making a profit on the bailout–or even getting back all the government’s money–was not critical to judging the success of the bailout.

Now don’t get me wrong, I have no problem with the government recouping its investment. But the main goal of the bailout was to avert another Great Depression.

By that score, the bailout was a success. But big problems remain: banks still have too much toxic securities on their balance sheets and there’s serious doubts about the longterm viability of the biggest bailout recipients–Citigroup and AIG.

That’s why I called on the Obama administration to get tough with AIG and put into works a plan for dissolving the defacto government owned insurer. Forcing AIG to sell off it parts ASAP would recoup some of the $120 billion still owed to the government.

Critics contend my approach is wrong and it makes sense to keep AIG together as long as possible for the government to be made totally whole. But that assumes AIG is a viable company–something I don’t think it is.

More to the point, it’s worth taking a loss on the government’s investment, if the dissolution of AIG reinstates some moral hazard on Wall Street.

4 comments

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I didn’t support the bailouts because I saw them as a waste of strained and (at this moment) irreplaceable resources, -being spent in all the wrong places -in all the wrong ways.

I still believe that is the case.

The “recession” isn’t over. Our whole society has crumbled and fallen to the ground nearly lifeless. I don’t see “green shoots” -I see smoldering embers among the mountain of ashes.

A depression is not just an economic phenomenon. A depression is a cultural, and philosophic phenomenon much more than a economic phenomenon.

It is a time of reassessment about the nature of reality. Expending at this time -one penny of bailout money on Wall Street -or any bank- was a mistake.

Wall Street is at the center of what is easily recognizable as a century-long blind alley leading to a massive cultural and philosophic mistake. Wall Street is about an unsustainable, belligerent and rapacious empire.

Wall Street is dead. The credit economy is dead. Science is dead.

And good riddance to these Enlightenment ideas too. They have each befouled the world.

The only catch-word that makes any sense today is “sustainable”. The bailouts are right now proving unsustainable is a huge way.

That’s all going to spell d-i-s-a-s-t-e-r.

AIG and Citi are now definitely rubbish – companies constantly telling lies to cover how much they actually lose and arrogantly ignoring the generosity of the us taxpayer. Government should unplug the life support for these two parasites so that our us economy can move on to the new and correct directions without too much influence of the parasites of the economic system – those failed banks and financers.

Posted by Rose Eli | Report as abusive

So what are you saying? Its ok for companies who have used the bailouts and recession to their benefit & have snapped up bargains on the cheap, but its not ok for the government or tax payers?! They are reaping the rewards for effectively raping the tax payers and investors and holders of pensions & as a result everyones going to have to pay a hell of a lot more tax as a result.

the only winners here are the greedy bankers – they got bonuses even though they caused this recession by taking risks. Then when the preverbial hit the fan they went cap in hand to the governments of the world. They got bailed out, then stuck up 2 fingers to everybody by making record bonuses for themselves. Wall street is far from dead – as is the bonus culture.

Posted by Ginger | Report as abusive

AIG should be disbanded viable or not. Because:
- its reputation is gone
- it practiced the most corrupt financial business in the Wall Street scandal and must be held fully accountable
- all bailout money must be returned by a fixed date
- disbandment demonstrates the government is serious about reform

Enron, Arthur Andersen, Worldcom, others all gone. AIG must join them in infamy.

Posted by The Real Deal | Report as abusive

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