How the Bailouts Could Have Gone Better

Reader Comments
Back to blog

The stimulus is like a guy putting a fingertip on an electric fence and getting a slight tingling for Joe six pack. The states get the money and local units bargain for the dough.
Nothing is coming for jobs as its just maintaining a few construction workers and much more gov. jobs doing the paperwork.
As for GM and the "clunker for cash" it was like giving away free hot dogs. Everyone wants one. I see the corporates getting bigger in agriculture as they are too big to fail.
The only stimulus is garage sales and farmers market where the real activity is going on.

merle ayres of IA 3:49PM September 12, 2009

Depression or no depression, if it was up to me, none of those companies would have got a dime of bailout. If my business begins to fail, the government is not going to come rushing in and save it. As far as the CEO's and boards are concerned, the government should have been spending thier time making sure these guys wern't making money off the public rather than throwing money at these losers. Now after spending millions of dollars to prop up companies like Government Motors, the big question is will the general public even buy thier product in the long run. The bailout looks like a big money pit to me and its on the taxpayers dime.

JB of IL 1:24PM September 12, 2009

Just one word: accountability. Until Board members are really independent (and not a bunch a friends exchanging directorships with nice compensations) and personally accountable, forget all the rest. Ethics is a top down process, not the other way around.
I wrote about the origin of the crisis on my blog (translated from a letter I sent to the head of the banking commission in a European country); I am convinced that boards are just vesting chairmen and CEOs decisions (compensation not being the least...) with no responsibility whatsoever.
http://marketsandbeyond.blogspot.com/2009/07/origin-of-financial-crisis-iconoclastic_28.html

Pascal Morin 3:34AM September 03, 2009

The end result is that we are becoming a corrupt crony capitalist country that will have no future for the average american.
That is why the shareholders must go broke and the bond holders take a haircut. If we are not able to absorb this pain then we will slip further into banana republic-dom.

jk of MI 11:35AM September 02, 2009

Alex,
Unless you work for Citi, could you please explain how you know exactly what is on Citi's balance sheet? More to the point, please explain how you know what's NOT on Citi's balance sheet. They have several hundred billion in off-balance sheet assets currently "marked to fantasy." I believe that FASB requires that all SIV's and other off-balance sheet vehicles be brought back on-balance sheet by the end of the year. Care to take a guess at what those assets are worth? Also, if there was no solvency problem, then why did Citi and B of A need more TARP at the beginning of this year? Why was PPIP planned? And why was it delayed only after the change to FASB 157?
Rather than "mindless anger," as you put it, the people most angry seem to be those who are most informed on these issues, including Barry Ritholtz who just wrote an entire book on the subject.

clawback of IN 11:33AM September 02, 2009

I never respond to these types of articles but this reasoning is so colloquial I had to put in my two cents...
First off...why is everyone obsessed with the idea of wiping out shareholders??? And how would have wiping out shareholders have helped stop the massive financial panic that was causing this downward spiral??? What we witnessed was a huge “run on the bank” caused by fear breeding panic breeding more panic, and elongated by the large reduction in financial control and effectiveness of oversight organizations over the past severalyears. This is not the shareholders’ fault..they didn’t invest in bad companies. The system simply failed them. They deserved to have the system to try to make good. You admit that letting Lehman fail was a mistake, causing a chain reaction…but yet you go on to blame other companies at the wrong end of the chain just for being in the wrong place at the wrong time.
Second....people really, really need to be careful with the word "insolvent." Please take sime time to learn about banking before you throw that word around. In the end it is going to turn out that WAMU was probably not insolvent....again just done in by panic. And Citibank and Bank of America? Absolutely not close to insolvent...the mere idea that they needed to be nationalized was absurd, and the mindless anger directed towards them (often times stirred on by media like yourself) is an unfortunate testament to our country’s culture of blaming without thinking.
No bank or financial institution is designed to (or SHOULD BE designed to) withstand the kind of panic that we witnessed over the past year. So...yes, the government could have done a much better job...by acting earlier and more decisively in the spring/summer of 2008 when it became clear to many people that the train had run off the track, rather than waiting for a huge failure like Lehman to spur on the rest. That is the angle an intelligent analysis of the facts would present, and what your artivcel should have been about.

Alex of MA 10:59AM September 02, 2009

You completely miss the point about WAMU (go look up the word Hyperbole) --
The point is an insolvent bank was resolved with no outlay of taxpayer money -- inept management was not rewarded, and foolish bond buyers were not rescued.
The book was extremely well researched, sourced, and footnoted with a team working just on that. If you thin there may be any other significant inaccuracies, please detail and I will address.

Barry Ritholtz of NY 8:10AM September 02, 2009

So many inaccuracies in this opinion piece. Wamu was seized on Thursday night to name the easiest to check... See www.wamustory.com to learn... Please!

jc of CO 9:52PM September 01, 2009

If you had not repealed the very high income taxes on very high incomes, there would have been NO FINANCIAL CRISIS AND NO BAILOUTS.
All of this was created by greed taxed too low. If you get the taxes back to 70-80-90% at some levels of personal income including capital gains, (say incomes over $50 million per year), you PREVENT the excesses before they occur.
ALL the risky bets were made to get some jerks stratospheric bonuses or gains on trades. Tax those kinds of magnets away and save your country.
We KNEW this in America until you believed that bum, Reagan. Yes, "bum". USE YOUR EYES AND SEE WHAT HE CAUSED FOR YOU IN ALL THIS.

Muser of NM 4:59PM September 01, 2009