The bailout plans for Wall Street are the biggest rip off of taxpayers ever. But wait a minute. There was the Savings and Loan crisis from the 1980s and 1990s.That was bad, wasn’t it?
In a nutshell: The Savings and Loans’ interest rates on deposits were regulated since the 1930’s and found themselves up against the competition of money market funds which could pay higher interest. Deregulation led to increasingly risky investment strategies and ultimately 747 Savings and Loans failed, leaving the taxpayer with $ 120 billion bill. The ensueing large budget deficits may have contributed to the recession of the early nineties.
Taking inflation into account the then $ 120 billion would amount to roughly $ 200 billion today. And it helped causing a two year recession.
That was bad really. And today?
Today’s bill stands at.. who knows? Let’s add some up. Bear Stearns bailout:Tens of billions, for the sake of the argument let me be generous and say $ 10 billion. Freddie and Fannie $100 billion each. AIG, as far as we know $ 85 billion. That sums up to almost 300 billion. Given, except for AIG this is just a risk assessment, but nevertheless the figures are impressive. This year budget deficit is $ 410 billion. Add this up. I am getting $ 700 billion. And yesterday’s bailout is not in the equation yet. Some say, the rescue package is worth $ 1 trillion plus.
I may have missed a few bailouts and stuff and maybe Fannie and Freddie won’t use up all the projected costs, but all this doesn’t bode well for your economy. Remember the federal debt already amounts to $9.5 trillion.
But Hank Paulson is an expert, right? Yes he is. Hank Paulson is a former Goldman Sachs executive he is acting without any interference by your elected officials up to now. President Bush has issued a statement amounting to a free pass and don’t expect any resistance from Congress. And they can’t be blamed for that either. The problem is, the failed system is so complex and intricate, only experienced investment banking specialists see through most of it and I venture to say not all of it either. You can only hope and pray the solution presented to you is going to be something else except a blatant bailing out of Paulson’s buddies at your expense.
Question: Would it be better to let Wall Street bite the bullet ? Henry Paulson says no, the financial system must be saved to protect the economy. But I wonder what he really wants to save. The celebratory mood in the financial markets tells me someone must have their interests at heart at least.
Your interests? Hope and pray. The money spent on bailing out the banks won’t build bridges (not even to nowhere) won’t fix antiquated sewer systems, won’t fix roads, won’t pay for education, won’t be there for health insurance, won’t be there for your veterans, won’t be there for your national security, just won’t be there for anything you’ll eventually need.