5 Bailouts That Did Some Good

Reader Comments
Back to blog

The Titanic Band is already playing at Chrysler and the fat lady is clearing her throat at GM. The Bush and Obama administrations bailed them out to keep the supply base from crashing. The automotive supply base not only supplies the big three but also all of the transplants. Now, they can both go belly up with minimal damage to the rest of the industry. GM and a IPO? You're an idiot if you buy. They can't even keep a head man.

Ed Karpowicz of FL 12:50PM December 03, 2009

GM gets millions, and at the same time, decides to cut out over fifty percent of it's "children" (Pontiac, Saturn, etc.) where does this fat pocket take GM?

Bob of MI 8:10PM October 27, 2009

Your statement "virtually wiped out shareholders and punished bondholders—as a reorganization should after a company fails" misstates what is actually happening and what should happen.
The shareholders were not wiped out as they deserved to be. The management and unions were not wiped out as they should have been. The bond holders who should have been paid portion of the GM assets, as the law requires instead are financing the reshuffled management of GM and the unions retirement fund.

John Fernandes of NY 1:37PM September 18, 2009

The bailout of GM and Chrysler was a waist of taxpayers money. Up here in Canada our goverments also thew in billions of dollars. What did GM and Chrysler do? They declared bankrupsy. So where did the money go? This is like socailism foe the rich, in the end we pay for them. Could GM and Chysler started up again in chapter 11 anyway, I think so!

Bruce Cumming 9:01PM September 11, 2009

I absolutely agree with earlier comments that the theft of WAMU was a bail out of JPM. JPM paid nothing for the bank and got free billions in the deal. JPM was called a crook institution in the 30's in The Bones of Plenty and nothing much has changed. Those involved including government officials should be sitting in prison and WAMU shareholders should be compensated. How about reporting on the insider trading in the stock that also occured after the government had already made their deal. The SEC should also have done something about that. No wonder people lost confidence in the "market".

Rick W. Olson of WA 9:21AM September 10, 2009

Pre-emptive seizure? Let me keep this simple for you WAMU was solvent and liquid.
Washington Mutual had over 25 billion in cash (liquid). In fact, Washington Mutual Bank, FSB had a scheduled transfer of 10 billion to Washington Mutual Bank on September 30th.
Washington Mutual's Tangible Common Equity, a strict measure of solvency, was 7.79%.
"The company's tangible equity to total tangible assets capital ratio increased during the second quarter to 7.79 percent from 6.40 percent in the first quarter..."
(http://newsroom.wamu.com/phoenix.zhtml?c=189529&p=irol-newsArticle&ID=1177849&highlight)
JPM's Tangible Common Equity is only 4.2%
(http://blogs.reuters.com/rolfe-winkler/files/2009/07/slide13.jpg).
Since I am doing your job of researching the facts here is more about Tangible Common Equity from Wikipedia, "On February 22nd, 2009, and February 24th, 2009 The Wall Street Journal and New York times (respectively) reported the Federal Reserve, in determining which banks were healthy and which ones required additional capital injections by the government, would "dwell on" tangible common equity as a measure of banks' health. This makes it harder for banks with significant amounts of intangibles on its balance sheet to be classified as "healthy"
Numbers don't lie. Washington Mutual was solvent and liquid. In fact, Washington Mutual would have been the highest scoring bank on the Treasury's Stress Tests. So when you talk about bailouts, WAMU was JPM's bailout, plain and simple.

John Wamu of CA 9:40AM September 06, 2009

Do you realize that the WaMu seizure was essentially bailing out JPM with WaMu stock and bond holder's money? One of the subsidiaries seized had 17 billion excess cash that WaMu was about to use. Not to mention the TARP that was passed the next week. Essentially JPM was in such a shape that it needed Bear Sterns and Wamu's assets to survive. And JPM was felt to be too big to fail. Please be better informed before declaring a blatant theft as a good thing.

A Wamu Shareholder of NY 1:27AM September 06, 2009

for house prices to go down some more (since I own one), but you have pointed out that the private market is supporting only about 5% of new mortgages---and that is hocus-pocus long term.
The REASON for that is that the interest rates are too low now ---and were too low, for that matter, when the CDO bundles were packaged and sold with phony-baloney top ratings during the bubble.
But there is a level where private money would go to mortgage lending---even with appropriate (riskier) ratings. That level is probably north of 8%---maybe 9%. House prices, of course, would be lower. Somehow or other, we have to get back there and it's hard to do it after fooling ourselves so long with low rates and a bubble in prices.

Muser of NM 3:22PM September 04, 2009