How should our government execute emergency bailouts?

[Dorsey]

The issue as to whether or not our government should bailout banks and other companies is very controversial. This thread is not discussing this. How do you think the government should execute emergency bailouts?(even if you disagree with the process altogether)

Lets try to aim our discussion to the most recent/abundant bank bail-outs within a year or 2, being that one's general opinion on this issue should differ when taking the economy's current state into consideration.

Our government bails out banks that fail. I don't think the concept of rewarding someone for messing up possesses much rationale, do you? That being said, the success of some bailouts is irrefutable: http://www.newgeography.com/content/00911-bailout-success (article, all information inside is cited/hyperlinked)

Which leaves us with the failures. Why exactly did these banks fail? USA Today provides some insight with some inquiries to the FDIC: http://www.usatoday.com/money/industries/banking/2008-07-13-how-do-bank-failures-happen_N.htm Which leads us to the question: What is the explanation for when bailouts aren't successful at all?

Being that the FDIC doesn't have a published online statement defining their discretion in determining who is applicable to be bailed out, inquiries such as this are a good indication of their policy. Notice how generalized the answer to the primary question is:

"A: Banks fail, and are taken over by federal regulators, when they are in danger of running out of cash to meet their financial obligations."

'Running out of cash to meet their financial obligations' is an awkward way to put it. This means that the banks that failed because of mismanagement and making poor business-related decisions qualify for bailouts. This is a flawed system being that it's a fact that some banks fail due to mismanagement.

So, why doesn't the government give control of failed banks to banks that are very successful? Discretion of their success should obviously be used and not just numbers, however it's more logical to do this than to reward banks with money when it's plausible that their failure was due to improper management. This is especially true when you take the economic recession into consideration. As a taxpayer, it disgruntles me to know that my tax dollars pay for a system like this during an economic recession. To put it simply, we should give control of failed banks to the banks that know how to NOT fail during a recession.

 

[Indigo Jeans]

IMO, the gov't should not give huge bailouts to failing banks. They may be a large chunk of the economy, but simply handing control of them over to running banks and a bit of startup funding should solve the problem. And yes, I too am annoyed that in these times, our tax dollars are practically being burned by being used to fund failing banks. It's like a vicious cycle. Bank begins to fail>we pay taxes to bailout banks> banks still fail>more taxes.

 

[Sucumbio]

The government should not engage in tax payer bailouts to private sector businesses. This socializes responsibility while privatizing gain. Case in point? AIG got a LOT of money. They took that money, invested it, and made out well. Who gained? AIG, not the tax payers.

It also leads to a poor mentality. The bail out mentality.

It also encourage TBTF (Too Big To Fail) which is inherently dangerous, and a practice that should stop.

 

[Aesir]

The Bailout was designed as a band aid something to stop the bleeding. If we had not executed bail outs and given certain corporations bankruptcy protection unemployment would be even higher then it is now. Sure the Bailout was poorly implemented, but it was better then the alternative of just letting the Economy bleed to death.

The Obama administration needs to realize they need to fix the problem now that we're on the road to recovery.

 

[Dorsey]

The Bailout was designed as a band aid something to stop the bleeding. If we had not executed bail outs and given certain corporations bankruptcy protection unemployment would be even higher then it is now. Sure the Bailout was poorly implemented, but it was better then the alternative of just letting the Economy bleed to death.

The Obama administration needs to realize they need to fix the problem now that we're on the road to recovery.

Yes, I agree. I also feel that the bailouts were necessary but poorly implemented. There are several executable methods for emergency bailouts, and I'm surprised that the one I discussed didn't have much popularity.

 

[Sucumbio]

Well to be fair your idea is actually being discussed in congress now; banks that are TBTF to be broken up.
My problem isn't with "bail outs" per se, it's more a problem with the regulation of the businesses by the government after the bailout. If our tax dollars are to go towards saving a private company from going under, then we-the-people should in fact OWN that company, and every bit of profit they get from that point on should become -our- profit. Socialize the risk, SOCIALIZE the gain. I want my 10 dollar check, in other words. Or a stock option. Something. It may not be a lot, but this sort of thing is why the bail outs are so frowned upon now. We bailed them out, and have nothing tangible to show for it.

As for the current administration's job, they're doing it. No one should have expected the economy to turn around on a dime, or even in the near future. The years following 9/11 really hurt this country, and until we alleviate ourselves from the problems that were created or exacerbated during that time, we are still band-aiding a bullet wound. We basically have to change our entire way of doing things in this country for it to work, that's the greatest strength and weakness of Obama. His grand ideas require everyone to play along, and he's assumed that our desperate situation will force our hand. And it has.

 

[Aesir]

Yeah I'm sure if 9/11 didn't happen Bush's Fiscal Irresponsibility wouldn't have been a big deal. As for giving control of Banks to ones that are successful, the thing about Financial crisis is people just get a quick fix out there asap. Because there's very little time to actually think it through.

We could have just done what Sweden Did during their Housing Collapse.

http://en.wikipedia.org/wiki/Swedish_banking_rescue

ultimately though we past that "what should we do." stage, and we're in the "how can we stop this from happening again." Stage.

 

[Ryan Ludovic]

I love how the first thing you said is 'this isn't about whether or not you agree with them' and the first few posts were just people disagreeing with them. lol


The best way to work in an emergency bailout plan would be to determine what corporations / companies absolutely require 'saving'. We are in a capitalist free-market economy(arguably) -- And because of this, it is not the governments job or role to intervene with a failure. Doing this causes the government to have too much of a role in our economy. Now, in the case that it was needed, and for the case of this debate, we need a bailout scheme that regulates and audits the company. Something that will reveal profits to the public, and supply them with a plan to PAY US BACK. The point of a bailout isnt to bury ourselves, but help something vital recover. The house should vote 2/3rds since we live in a system where our people don't have a choice.

The Bailout was designed as a band aid something to stop the bleeding. If we had not executed bail outs and given certain corporations bankruptcy protection unemployment would be even higher then it is now. Sure the Bailout was poorly implemented, but it was better then the alternative of just letting the Economy bleed to death.

The Obama administration needs to realize they need to fix the problem now that we're on the road to recovery.

It's hard to determine how many jobs we've "saved", considering the fact that we so negatively impacted the dollar by creating money that inflates our dollar that is then expected of the average citizen to pay off.

ultimately though we past that "what should we do." stage, and we're in the "how can we stop this from happening again." Stage.

I beg to differ. We have not recovered. We're 11 trillion dollars in debt. All we did was increase our countries debt and delay the inevitable. Now that we're in more debt, they'll fall faster than before. We simply inflated our dollar more through the unaudited federal reserve and ushered in a twilight zone styled population that things 'everythings better now, so long as we dont look a year into the future or more'. When our money is worth less because inflation, it will require more money than previously to revive the banks again when they coast back down the hill we rolled them up. To do that, we'll need to inflate our money even more!

 

[Aesir]

I love how the first thing you said is 'this isn't about whether or not you agree with them' and the first few posts were just people disagreeing with them. lol


The best way to work in an emergency bailout plan would be to determine what corporations / companies absolutely require 'saving'. We are in a capitalist free-market economy(arguably) -- And because of this, it is not the governments job or role to intervene with a failure. Doing this causes the government to have too much of a role in our economy. Now, in the case that it was needed, and for the case of this debate, we need a bailout scheme that regulates and audits the company. Something that will reveal profits to the public, and supply them with a plan to PAY US BACK. The point of a bailout isnt to bury ourselves, but help something vital recover. The house should vote 2/3rds since we live in a system where our people don't have a choice.

Hi welcome to 3 weeks ago, there's already a consensus among us the the bail out was poor implemented. We know tighter regulation should have been enforced, that's not the issue right now, you're talking about actions that are more than six months old now.

It's hard to determine how many jobs we've "saved", considering the fact that we so negatively impacted the dollar by creating money that inflates our dollar that is then expected of the average citizen to pay off.

Doing nothing would have put us in a full blown depression, I love how people complain about the Economy now, but if congress had done nothing it would be a lot worse. our 10% unemployment is more favorable than a 15 or 20% unemployment. Waiting for the market to fix it's self would be a long and grueling process would have made real people suffer not just these failing corporations and banks. By bailing them out we stopped a problem from escalating even more.

So yeah you can make an argument about how m any "jobs" were saved, but you better be prepared to deal with the fact that in the long term it was more favorable to save them then let them fail.

I beg to differ. We have not recovered. We're 11 trillion dollars in debt. All we did was increase our countries debt and delay the inevitable. Now that we're in more debt, they'll fall faster than before. We simply inflated our dollar more through the unaudited federal reserve and ushered in a twilight zone styled population that things 'everythings better now, so long as we dont look a year into the future or more'. When our money is worth less because inflation, it will require more money than previously to revive the banks again when they coast back down the hill we rolled them up. To do that, we'll need to inflate our money even more!

God, this is why I hate economic discussions especially in the proving grounds. You do realize you're treading past the actual topic now and into the stimulus right?

If the Government goes into debt during the recession it isn't a bad thing (It's not good but not bad either). That's Keynesian economics. You cut taxes and increase spending. When the Stock Market goes up (which it has) people feel safer again and the economy will recover. When the Economy recovers that's when the Government can worry about repaying it's debt. (By increasing taxes on wealthy and cutting government spending.)

 

[Ryan Ludovic]

Hi welcome to 3 weeks ago, there's already a consensus among us the the bail out was poor implemented. We know tighter regulation should have been enforced, that's not the issue right now, you're talking about actions that are more than six months old now.




Doing nothing would have put us in a full blown depression, I love how people complain about the Economy now, but if congress had done nothing it would be a lot worse. our 10% unemployment is more favorable than a 15 or 20% unemployment. Waiting for the market to fix it's self would be a long and grueling process would have made real people suffer not just these failing corporations and banks. By bailing them out we stopped a problem from escalating even more.

So yeah you can make an argument about how m any "jobs" were saved, but you better be prepared to deal with the fact that in the long term it was more favorable to save them then let them fail.




God, this is why I hate economic discussions especially in the proving grounds. You do realize you're treading past the actual topic now and into the stimulus right?

If the Government goes into debt during the recession it isn't a bad thing (It's not good but not bad either). That's Keynesian economics. You cut taxes and increase spending. When the Stock Market goes up (which it has) people feel safer again and the economy will recover. When the Economy recovers that's when the Government can worry about repaying it's debt. (By increasing taxes on wealthy and cutting government spending.)

The disagreement isn't doing nothing versus doing something. The entire debate is on what SHOULD have been done. If this is incorrect, I apologize for misunderstanding what was being debated. The argument isn't on how many jobs are saved, it's how could we have saved more jobs. This isn't wikipedia, it's a debate on what should have been done.

Moreso, I didn't realize this debate ended 3 weeks ago.
Someone should have said something. I wouldn't have wasted your enthusiasm.

 

[Aesir]

Don't worry about it, I offered counter points to your argument. I just realized I was being grouchy to you for no reason. Carry on.