Tezak's thought repository

Everyone should stop worrying about the bailout money

I know why people get angry that rich Wall St. firms got bailed out and they didn’t. I know that greed is one of the most angering traits among the American public. But please, for the love of all that is holy in this world, stop complaining about where the bailout money is going.

First lets address the fact the government bailed out Wall St. instead of Main St. Every news agency around likes to through out the number of dollars each family could have received instead of bank of America and AIG. What they don’t talk about is the terms of that cash. Lets take a second and look at what would happen if we applied the Wall St. bailout to Main St.

First, all of the money is in the form of loans, which have interests rates, or in the form of the government taking ownership in the companies, over other debt holders. So if you would like to have to repay your bailout to the government over five years, or have the government get a ownership stake in your house, let me know, cause there are probably five of you in the country. So stop complaining that you didn’t get any money, cause it sure ain’t free.

Second, it doesn’t matter if the money is being spend how everyone thinks it should. This applies especially to the idea that the banks were required to take the government money and use it for the explicit purpose of making loans. The treasury never said that was the purpose of the money. The purpose was to stabilize the economy. Congress said it was supposed to be for making loans, but then didn’t put any provisions in the bill. Also, since the government is making this money in the form of loans or stock, it will be getting all of the money back, with interest. The TARP will generate billions of dollars of income for the the treasury of the next 10 years.

Thirdly, why does it matter in general? Because of the above stipulations, and the fact the government is making the money back. Does it really matter what its used for, as long as it helps the greater economy? The banks were on the brink of utter collapse and it is my belief that the entire bailout is part confidence boost for stock holders, and part backstop to keep the market from going over a cliff. BoA and JP Morgan probably didn’t need alot of the TARP money, but they took it because it would make them better and shore up their balance sheets for future write downs. In exchange the government gets shares of stock at fire-sale prices of companies that will not being going bankrupt in our time.

So basically, everyone needs to calm the hell down. Before you complain again, put yourself in the shoes of Bernanke or Paulson, knowing the entire economy of the US and the world was likely resting on your decision. We are still able to get money out of our bank and but christmas presents. I think they are doing ok.