This is just as predicted, and another early addition to the 'Told You So' archive.
Remember back when the $700 billion bailout was passed? Supporters said that this infusion of cash was absolutely critical in order to allow banks to start lending money again. They said the credit crunch was caused because no one was lending money anymore, right? Well, guess what? Not so anymore:
U.S. Treasury Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets.
``Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards,'' Paulson said today in a speech at the Treasury in Washington. ``This is creating a heavy burden on the American people and reducing the number of jobs in our economy.''
Paulson's remarks are an acknowledgement that the pitch he made to Congress for the bailout hasn't delivered what was promised. Paulson sold the rescue plan as a way to rid bank balance sheets of illiquid mortgage assets, and he may encounter resistance from Congress for the remaining $350 billion in TARP funds after using most of the first half to buy bank stakes.
Instead of starting to lend money again, these banks and Wall Street firms are doing other things with all of these billions of dollars that Paulson is throwing at them, either investing them or, unbelievably, still offering gaudy bonuses to executives.
We who opposed this bailout from day one cited two major concerns: lack of transparency and accountability, and that it wouldn't work. I suppose you could add a third concern about the pure socialism of it, too. But, we've now seen all of those concerns become reality in the past couple days (see transparency here). The problem is that Paulson is an emperor when it comes to the rest of that taxpayer money - he has no accountability to anyone for anything. This was a bad idea, a bad bill, a bad implementation, with bad implications as results. Our leaders (Bush, Paulson, Congress, etc.) rang the warning bells of imminent crisis and looming disaster if this bailout didn't get passed, and that suckered a lot of people. Part of the problem was that everyone was rushing so fast to 'fix' things that they failed to correctly diagnose the real root of the problem. As such, there was no hope of addressing things in such a way that they would actually get fixed. There were only a few people who stood firm against the bailout on the basis of these principles, and who suggested slowing down and taking more time to get things right.
Those people were conservatives.
This is a prime example of how conservatives need to build their case for the future. Conservatives are the ones who tried to stop this massive boondoggle from happening, and were the only ones saying that it was more important to do the right thing than just the first thing. Speaking from a philosophical position, not only is this bailout fundamentally socialist, but it also crosses a line down a slippery slope: now that we've started bailout out failed private companies with taxpayer money, where do we stop? For example, the next up in the bailout line is credit card companies. CREDIT CARD COMPANIES!!! Why should those of us who consistently pay our bills on time bail out people who are irresponsible with their money? This is ludicrous.
Let's look at the big Detroit bailout as an example. The Big 3 say they need this bailout to get through a cash flow problem. Well, the reality is that if this bailout goes through, that taxpayer money won't go to making the company more profitable, it will simply go to pay off debts run up due to unions. It is the UAW that has dragged down the auto industry, with their excessively high salaries and expensive benefits packages, paying people NOT to work, and other stupid policies. Megan McArdle:
GM's operations are not otherwise sound. They have been headed for this moment since 1973. Conservatives blame legacy costs, and liberals blame management. They're both right. GM's legacy costs are crazy. So is the UAW leadership, which, goaded by the retirees, is knowingly driving the company into bankruptcy rather than negotiate clearly unsustainable deals. Those legacy costs would probably not be supportable by any company in a competitive environment; the UAW's expectations were created in an era of comfortable oligopoly, when all costs could be directly passed on to the consumer. And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers. My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric. But the examples are legion.
The point is that, even if this bailout goes through, that money will not change how the Big 3 do business. There is no plan for the changing of infrastructure, there is no plan for revamping the union agreements, there is no plan for cleaning out poor management. If these are the very things that have put the Big 3 into trouble, and if these things don't change, does anyone realistically expect the Big 3 NOT to be right back into this position again in the near future? The only difference is that there will be even more people and money wrapped up in it, so the pain at the next collapse will be even worse.
And, once again: where does this stop? Is the federal government going to take over every industry in the country? You know how well the government runs everything it does: terribly. Why would we want the government owning (i.e. running) the auto industry, the banking industry, the credit card industry, health care, etc. if all they do is screw up everything they do? But, logically, where do we stop? It's not fair to bail out American Express but not Circuit City, is it? So, why aren't we bailing out Circuit City, too? You see where this goes? Eventually, it all goes down the toilet.
Stop the bailouts now! Call and write your Congresspeople - there are rumors of a special session of Congress coming up soon to deal with bailouts. Get your digs in - this is one instance in which it is a very good thing to vote (with your voice) early and often! Get busy!
There's my two cents.
No comments:
Post a Comment