The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.
So let me get this straight: in order to pay for "loans" to companies that have failed due to naive (at best) business models . . .in order to pay for credit that was in reality unaffordable, we are going to lend more credit that we can't afford as a nation.
The notion that there are companies deemed "too big to fail" boggles me completely. Inherent in the axiom "supply and demand" is that there will be times when demand will falter for various reasons. This is basically how the stock market works: when stocks are in demand their price increases; when there is an abundant supply of a certain stock for sale, its price decreases. Multinational companies dealing with amounts of money equivalent to the GDP of certain nations have known this; it's not a surprise. They just didn't give a damn. So now we're going to bankrupt the country in order to bail out businesses that deserve to fail. Stockholders in those companies should be demanding CEO heads on silver platters; instead, they're clutching their certificates in the hopes of a government dole.
What has happened to capitalism?
It's been announced that:
U.S. federal regulators have approved a radical plan to stabilize Citigroup in a complex arrangement in which the government could soak up tens of billions of dollars in losses at the struggling bank.
The plan calls for the U.S. government to back about $306 billion in loans and securities and to invest about $20 billion directly in the company.
A farmer friend I know came up to me in the store the other day and made a suggestion. He thinks the government should just forget this bailout crap and write every single American a check for $1 million, which we could then go out and spend like crazy. It would be only a fraction of the $700 billion proposed (oh, wait, make that $1.4 trillion now), because our spending would get the economy going faster than a bat out of hell.
Why do I feel that a farmer is more qualified to run the financial markets than anyone else I've heard so far?
Please, discuss. I'd love to hear some options at this point.
UPDATE: Great news! The hits just keep on comin'!! (note sarcasm)