401K or bust...

[onoway]

It's not I who makes these decisions. But during the 2008 financial crisis, huge financial institutions like JP Morgan Chase and AIG were considered too big to fail, even though they caused the crisis in the first place. The government has also bailed out most of the car companies.

 

If a company like GM went out of business, huge numbers of workers would lose their jobs, dealer franchises would go out of business because they had no cars to sell, and there would be ripple effects down the supply chain. The workers without jobs would stop paying income taxes, the businesses would stop paying corporate taxes. Yeah, eventually other companies will increase their production to make up for it, and they'll hire many of these workers to build them. But that will take quite a bit of time, and crisis until that happens would probably be much worse than the recession we went into 5 years ago.

 

I'm not an economist, I can't really be sure of the magnitude, this is just my intuitive, lay opinion. But it seemed like most economists were in favor of the bailouts, because the alternative would be much worse.

I'm not an economist either but some things need to be noticed.

 

In Canada, " in order to save jobs" the government handed over millions of dollars to companies who were threatening to move out of the country. At least two of them moved out of the country anyway asap. So what exactly did we gain for all that taxpayer money? A few months worth of work..it would likely have been cheaper and more productive to give it to the workers instead, to retrain or to start new small businesses. Polls consistently say most people want to do that and even though most of those may fail, it's small businesses which keep a country alive, not the monolithic ones which replace as many workers as possible as quickly as possible with robotics etc.

 

We have bailed out subsidiaries of American car companies twice (Ford only once ..so far..)yet have still fallen from 3rd to eleventh in production. Air Canada has been bailed out at least twice, and Blue Sky, a huge conglomerate of pig farms which was finally sold to new investors last year, had been bailed out by taxpayer money twice just in the four or so years previously. If bailing out companies works, why does it need to be redone?

 

As an aside, taxpayer money was simultaneously being given to Blue Sky to keep them going at the same time as small pig farmers were being paid pennies on the dollar to kill their breeding sows because of overproduction of pigs.

 

Why is it that for the companies which employ many workers some form of the following is apparently never up for consideration?

" It's really too bad you can't meet your obligations and have to close down shop. I guess we will have to take it over and keep it going with the workers who are already doing the job, and promote some of them to management with a panel of expert advisors to help. Good luck now, you hear?"

Is it that McCarthyism still exerts a gangrenous influence over common sense or something else?

 

It seems as though there is almost a deliberate decision to ignore the concept of consequences. Yet Pavlov clearly demonstrated that consequences drive learning. What do you suppose the bankers who walked away from the debacle they were responsible for, have learned? to say nothing of everyone else, corporate or individual, who was watching this?

 

Perhaps the problem is that it is a whole lot simpler to hand a whack of money over to one entity than to deal with hundreds. Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

[32519]

Check this out - NYSE Euronext.

 

Here is an extract from the article:

"For the first time in its 213 year history, the New York Stock Exchange became a for-profit company, and began trading publicly on its own stock exchange under the NYX ticker. Owners of the 1,366 NYSE seats received 80,177 shares of NYSE Group stock plus $300,000 in cash and $70,571 in dividends for each seat. The completion of this deal created two new branches of the NYSE Group: NYSE Arca and NYSE Arca Europe, which launched after the acquisition of Euronext."

 

Does anyone have a link to the shareregister of NYSE Euronext so that we can find out who these 1,366 shareholders are? Whoever they are they are making a lot of money out of your daily trades.

[blackshoe]

Perhaps the problem is that it is a whole lot simpler to hand a whack of money over to one entity than to deal with hundreds. Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

Government's solution to most problems is either to throw money at them, or try to kill them. In almost all cases, politicians have no idea whether their "solution" will work, or what the consequences might be if it doesn't.

[billw55]

... Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

Careful there onoway, you're starting to sound ... dare I say ... conservative.

[kenberg]

In Three Days of the Condor (I like it, I don't claim it is a great movie) an old CIA/OSS man (John Houseman) is asked if he misses the action of the good old days. "I miss the clarity", he says.

 

 

In many, many ways, in defense, in economics, in education, this seems to sum up our current situation. Perhaps the previous clarity was really a mirage. Well then I miss the mirage.

[ArtK78]

Perhaps the problem is that it is a whole lot simpler to hand a whack of money over to one entity than to deal with hundreds. Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

Seems like the bailouts of AIG and General Motors (and, much earlier, Chrysler) worked pretty well.

 

Whether bailouts are a good policy is a debatable subject, but at least in these instances, they worked. And the government got paid back.

 

 

[barmar]

Government's solution to most problems is either to throw money at them, or try to kill them.

And they usually get it backwards -- the bankers are all still alive.

[onoway]

Careful there onoway, you're starting to sound ... dare I say ... conservative.

One of my pet peeves is how people try to put labels on everything so they know what tidy little box to file it away in and don't have to think anymore.

 

Perhaps this might be of interest, it's certainly pertinent to what I am objecting to:

[blackshoe]

Seems like the bailouts of AIG and General Motors (and, much earlier, Chrysler) worked pretty well.

 

Whether bailouts are a good policy is a debatable subject, but at least in these instances, they worked. And the government got paid back.

It did? I think I heard that in the case of Chrysler. Maybe. I didn't hear it in the other cases.

 

I think you also need to define what you mean by "worked pretty well".

[ArtK78]

It did? I think I heard that in the case of Chrysler. Maybe. I didn't hear it in the other cases.

 

I think you also need to define what you mean by "worked pretty well".

The companies continue to exist, employ workers, and the government got paid back through sale of shares owned by the government and repayment of loans (not to mention employment taxes and income taxes).

 

Seems like a good deal to me.

[blackshoe]

How did the government come to own these shares?

[ArtK78]

How did the government come to own these shares?

It was a condition of the bailout.

[blackshoe]

It was a condition of the bailout.

Fair enough. I don't think you can count taxes collected post-bailout as "payback". That apparently leaves the stock and the "repayment of loans" you mentioned. Did the sum of those two things, for each bailout, cover all the costs of the bailout? If not, I don't think you can say that the government was "repaid" for doing it.

[ArtK78]

Fair enough. I don't think you can count taxes collected post-bailout as "payback". That apparently leaves the stock and the "repayment of loans" you mentioned. Did the sum of those two things, for each bailout, cover all the costs of the bailout? If not, I don't think you can say that the government was "repaid" for doing it.

On the contrary, the primary purpose of the bailout is to preserve the companies in their present form (or some close approximation thereof). This preserves jobs, which, from the point of view of the government, both preserves the income and employment taxes that such jobs produce, and avoids having to pay unemployment benefits which would have been payable if those employed by the bailed out companies would have lost their jobs.

 

So, while the repayment of loans and the gains on the sale of the government's equity in the companies obtained in the bailouts are the most objectively measurable repayments, there are significant other benefits to the bailouts.

 

As for whether the repayment of loans and the gain on the sale of the equity interests paid the government in full for the bailouts, that is not the be all and the end all of the discussion. My understanding is that these repayments either made the government whole or went a long way towards reducing the out-of-pocket cost of the bailouts. But, as I mentioned, there are many other benefits of the bailouts which are much more difficult to quantify.

 

And this doesn't even touch upon the psychological benefits to the employees of these companies not to have to lose their jobs and reenter the workplace in some other position.

 

There have been a lot of articles written regarding the "true" cost of the bailout of AIG and other companies, both favorable and unfavorable to the government. But I have not seen any article that takes into account other aspects of the bailout, such as the preservation of jobs at the companies and the effect on the economy and the fisc resulting from it. This is an important aspect of the bailouts which is almost universally overlooked.

[PassedOut]

On the contrary, the primary purpose of the bailout is to preserve the companies in their present form (or some close approximation thereof). This preserves jobs, which, from the point of view of the government, both preserves the income and employment taxes that such jobs produce, and avoids having to pay unemployment benefits which would have been payable if those employed by the bailed out companies would have lost their jobs.

 

So, while the repayment of loans and the gains on the sale of the government's equity in the companies obtained in the bailouts are the most objectively measurable repayments, there are significant other benefits to the bailouts.

 

As for whether the repayment of loans and the gain on the sale of the equity interests paid the government in full for the bailouts, that is not the be all and the end all of the discussion. My understanding is that these repayments either made the government whole or went a long way towards reducing the out-of-pocket cost of the bailouts. But, as I mentioned, there are many other benefits of the bailouts which are much more difficult to quantify.

 

And this doesn't even touch upon the psychological benefits to the employees of these companies not to have to lose their jobs and reenter the workplace in some other position.

Seems impossible to formulate any reasonable argument against this, which is, I suppose, why none has been made.

 

The purposes of an economic system must be (a) to produce the goods and services needed by the population and (b) to ensure a fairly equitable distribution of those goods and services across the population. The bailout successfully addressed both.

[Winstonm]

Seems impossible to formulate any reasonable argument against this, which is, I suppose, why none has been made.

 

The purposes of an economic system must be (a) to produce the goods and services needed by the population and (b) to ensure a fairly equitable distribution of those goods and services across the population. The bailout successfully addressed both.

 

I find it interesting that "job creation" is not listed in this economic system, although "full employment" is a goal of the Federal Reserve. My guess is employment in the system you describe would be considered part of production but that is certainly not a guarantee, is it? Suppose we had ultimate technology and could produce everything we need with only 10% of the current workforce - where in the system do those out-of-work people fit and how are their needs addressed?

 

Without jobs there is lowered demand. Without demand, capital is hoarded rather than invested. Changing demographics and improving technology creates a difficult scenario for the working class - and there is no simplistic solution. Regardless, job creation should hold a prominent place on any list of economic activities, IMO.

[Winstonm]

Fair enough. I don't think you can count taxes collected post-bailout as "payback". That apparently leaves the stock and the "repayment of loans" you mentioned. Did the sum of those two things, for each bailout, cover all the costs of the bailout? If not, I don't think you can say that the government was "repaid" for doing it.

 

I think this is a genuine problem many people have in that they view government actions as equal to individual actions - but government is concerned with the good of all while individuals may only consider the personal consequences.

 

On a long-range view, it may be that GM collapsing could have been rectified by market forces - but the devastating effects from such a collapse would have had a huge ripple effect. Government is charged with a duty to prevent this type of collapse if possible, and if not possible, to defray the devastation to lives as much as is reasonable.

 

As a friend of mine told me his mother told him. Pete, there is what is right and there is what is real. In life, you have to deal with what is real.

[billw55]

I think this is a genuine problem many people have in that they view government actions as equal to individual actions - but government is concerned with the good of all while individuals may only consider the personal consequences.

 

LOL

[ArtK78]

I think this is a genuine problem many people have in that they view government actions as equal to individual actions - but government is concerned with the good of all while individuals may only consider the personal consequences.

 

 

LOL

You have a very cynical attitude.

 

I agree with Winstonm's post.

[onoway]

If the end result is a drop anyway from 3rd to 11th in production from scaling back - and hearing mutterings about more jobs being cut even now - or if the bailouts need to happen more than once, it sounds to me more like dying slowly from an ongoing infection rather than cutting it out and starting to heal. The longer the infection is allowed to continue the harder it is to heal, but eventually things will come to the crunch. Then what?

 

It wasn't just the government..the workers in the auto bailouts (in Canada at least) took wage rollbacks with the understanding that things would be adjusted upwards when all the dust had settled. Last I heard, that has not happened. But now they are afraid to go for what they were promised in case the rest of them lose their jobs. This hardly seems to be the optimum or even a particularly positive outcome. There's certainly no feeling of security there.

 

We are becoming a society of serfs to big business, from people afraid to ask for what they were promised to being told what sort of lightbulbs we are permitted to use, (let's put more mercury into our homes and landfills) to companies being held above the law (Monsanto being given (temporary so far) immunity from lawsuits. All paid for by taxpayer dollars. Sorta sad.

[onoway]

I think this is a genuine problem many people have in that they view government actions as equal to individual actions - but government is concerned with the good of all while individuals may only consider the personal consequences.

 

I tend to think that that is what government is SUPPOSED to do but they have mostly got way off track. Someone once said that it costs so many millions of dollars now to get elected to top offices that when people get there they owe a whole lot of favors, and if they don't honor them then somehow everything they try to do gets lost or buried. If one party comes out with something great, the other side has to shoot it down just because they didn't suggest it. I'm sure that's not the way things were supposed to happen, but more and more it's the way things are happening.

 

Not sure I can point to anything much that's come out of our government in the past while that I'd consider in any way related to "the good of all". I can surely point to a whole lot which is not. I've no idea how you get back to the ideal.

 

Jefferson had something pertinent to say" Experience hath shewn, that even under the best forms (of government) those entrusted with power have, in time, and by slow operations, perverted it into tyranny”

[barmar]

Jefferson had something pertinent to say" Experience hath shewn, that even under the best forms (of government) those entrusted with power have, in time, and by slow operations, perverted it into tyranny”

And who was it who said that democracy is the worst form of government, except all the others?

[hrothgar]

Churchill

[blackshoe]

Government is charged with a duty to prevent this type of collapse if possible, and if not possible, to defray the devastation to lives as much as is reasonable.

Whence comes this charge to government?

[ArtK78]

Whence comes this charge to government?

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.