Won’t it be fun for you and me and the guy who bags my groceries to own a piece of all those poorly managed banks in America? The money was set aside by Congress to buy up bad mortgages, to help keep taxpayers in their homes, to loosen up the credit markets so more Americans—and American businesses—could buy the things they need. Instead, Secretary of the Treasury Henry Paulson says he’s spent $250 billion of the $700 billion to buy shares in shaky banks. He asking for the next round of banks to apply for the $100 billion he’ll be doling out in December. We taxpayers certainly are generous with our Christmas presents.
The next thing you know we will all own a piece of the Big Three U.S. automakers. Won’t that be great? All that money the government withholds from your paycheck propping up three more badly managed companies. My Dad always told me I should own some GM stock. Of course, that was a long, long time ago back when GM used to be known as a Blue Chip stock.
I recognize that bankruptcy reorganization for GM, Ford, and Chrysler would put a lot of people out of work. But not all these companies would fold. General Motors still sells about 21% of the cars purchased in America, and though that is less than half the share held by GM twenty years ago, Americans will still need to buy cars. The system of free enterprise that has made our country the greatest nation in the world for innovators and inventors only works as well as it does because it has a down side too: when companies are mismanaged or not providing products we like, or aren’t innovative or adaptable enough, they have always been forced to fold and start over.
Bailing out failed companies will become an endless cycle and in the end, I do not think it will stave off a big recession or a depression. It might make matters worse. Bad companies will limp along and eventually fail anyway after having sucked up billions and billions of taxpayers’ hard-earned dollars.
From my years as a reporter in Washington I have come to believe that Washington is a town run by lobbyists. In this crisis lobbyists for beleaguered industries have flooded the offices of members of Congress and the Department of the Treasury with their panic visits and doomsday scenarios. The bureaucrats inside the beltway respond best to the guys who tug at their sleeves the hardest.
A friend of mine, who has toiled away all her life at a low-paying job, led a thrifty life, given more to her company that she has asked in return, has never gone over her head in debt, and always made her mortgage payments on time told me the other day, that she and some of her coworkers were preparing their bailout letters to send to Congress. They want to know why they can’t be bailed out too.
And though she was using what is known in America as gallows humor, her point was made: nobody in Washington has a big fancy office that lobbies for you and me, the taxpayers. Will we be getting dividends from these companies we’re bailing out? Not bloody likely.
Quick: name a really cool American car. A really cool American car that get’s good mileage? A really cool American car that gets good mileage and is competitively priced?
That’s okay, you can get back to me later.