Friday, December 26, 2008

Instant Bailouts



When US treasury secretary, Henry Paulson, came up with the plan to bail out financial insitutions by injecting hundreds of billions of dollars to purchase non-performing loans or "bad debt", he told Congress that there was not much time to ponder upon the issue. His view was that as more time is wasted, some of the biggest financial institutions might collapse, just like Lehman Brothers did. In a matter of a few days, the bill was passed. So why did everything happened so quickly? Did Paulson and his associates not want the Congress members to analyse the issue at hand, or were they scared that the US public might start questioning the rational of saving the ever profiteering banks with tax payer's money? Although so much money has been poured into these financial institutions, reports are that banks are still shy at lending money. Why? Where have all these funds gone? Recently, a US journalist asked around 21 financial institutions, that received atleast $1 billion or more in financial relief, about the whereabouts of these funds. Surprisingly, not even a single institution agreed to disclose the information. This raises a lot of questions.
Why was so much haste shown in approving the $700 billion bailout package for financial institutions? Why was tax payer's money used to make these fundings? Why were some quarters so eager to save the banks while they have not shown the same urgency in saving other industries like the Auto Sector which is directly or indirectly connected with 3 million jos? Who owns these financial institutions? Was it fair to use tax-payers' money when a man on the main street still cant get loans or stay in his house? Who is Henry Paulson? Why was he given unprecedented powers by the US government to overlook the bailout? Why was Leman Brothers allowed to fail while other institutions like Goldman Sachs survived? What is Paulson's connection and history with Goldman Sachs? Why was the bailout plan changed from the original purpose that it was supposed to serve? How much more bailout money would Paulson ask for in the future? Will spending all these treasury funds really help the economic recovery? Will the US public debt continue to rise from the current $10.6 trillion level? Will these efforts help ordinary people or just save the interests of those who are already playing in millions and billions?
The logic and effectiveness of this policy can only be judged with time. However, several loop-holes along with accusations of hidden intentions and corruption are only going to make things difficult for the government and for the economy as a whole.

6 comments:

  1. thank you for visiting my Chinese military news blog, please visit all of my sites.

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  2. At the time of the bailout, somebody did argue in The Guardian as to why this money wasn't injected directly into bailing out the poor who were actually victimized by this debt-spiral, and why the rich banks. If tax money was going to be used, it might as well have been used to save the taxpayer. In the wee days of the U.S., it was argued, "No taxes without representation!" And look who is representing what now.

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  3. I read somewhere that the bailout situation is just as if people in a small town are addicted to a casino and that casino is going to go bankrupt. People often lose their money in this casino but they are so addicted that they pool up their resources to save the casino. This is how the US taxpayers have saved these banks at their own cost.

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  4. I think US has been living beyond its means: the government and the people. The kind of reliance that they have on credit was bound to bring them to the current situation as whenever debt will get out of control, there will be trouble. However, the way they have handled the issue is appaling. The bailout has gone into the worng hands, yet again.

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