Looks like bailouts don’t work

Conservative Republicans regularly accuse liberal Democrats to trying to solve problems by throwing money at them. The Federal Reserve has been throwing billions into the banking system to stabilize the credit markets and no one has been complaining about it.

This week the Fed participated in an unprecedented global rate cut: An orchestrated cut in interest rates with 20 other nations in an attempt to encourage financial institutions to borrow from their central banks and begin making loans to credit-starved businesses.

And the U.S. Treasury said it would begin to tap the $700 billion in bailout money to buy ownership shares in willing banks. The theory is that banks wouldn’t be so afraid to make loans if the government is in partnership with them.

The Fed also cut its key interest rate to 1.5 percent. That rate was as high as 5.25 percent just two years ago, and it’s hard to believe that just this spring the Fed was more worried about inflation rather than the deflating economy we have this fall.

And Washington is expecting some kind of gesture out of the G-7 finance minister who will be in the capital this weekend for the annual meeting of the World Bank and International Monetary Fund and a visit with President Bush.

The Fed has to be credited with persistence and imagination. Back in March, it offered $400 billion in loans to the mortgage market; it pledged $200 billion to prop up Fannie Mae and Freddie Mac; it guaranteed $29 billion to underwrite the sale of investment bank Bear Stearns; it put $85 billion into insurer AIG; and it offered $50 billion to help out money market funds. And then there’s the $700 billion in bailout money.

And still the bad news continues. The IMF said the U.S. economic slowdown would last years, not months, and that our all but certain recession would be the worst since 1982.

If shoveling money at a problem work, we should by all rights be close to having this thing licked.

6 Responses to "Looks like bailouts don’t work"

  1. inibo  October 12, 2008 at 6:37 pm

    It’s nice to see the concepts of the Austrian School percolating over to the radical center. Thank you, Ron Paul.

    inibo

    The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.-Amendment X

  2. almandine  October 10, 2008 at 10:07 am

    It was a CEO bailout package…

    give ‘em the money and they’ll bail out!

  3. AustinRanter  October 10, 2008 at 12:27 pm

    Big Trouble is a Brewin Boys and Girls

    You know…with all of the political B.S. on both sided of the line…neither Obama or McCain is explaining to the voters why the market is crashing.

    Both Dems and Repubs are keenly aware as to why the markets are crashing, but they are not speaking out because they partnered with the financial institutions in every arena. They both sold out this nation for personal gain. They allowed the market place to open up a giant casino for special market institution players only…and when the smoke began to clear…the chips were lost by all of the players. The American public paid for those chips.

    McCain and Obama are both screaming about “What” we need to do…but not “How” it needs to be done in any sensible details. Both know damn well what happened…and that disclosure of the fact that Congress and the Executive Branch allowed legislation for lending institutions to convert debt into securities and then sell, buy, and swap those securities to the point that there is no determinable values. That made every type of loan much like pension funds, IRA, etc., etc. like a stock or bond. Then…the massive gambling began by the market place. They were rolling in the dough because securities are, for all practical purposes the same as cash. But all of our collateral that backed up those securities were discounted repeatedly, manipulated, and laid on the craps table of the Wall St. Casino. Then the insurance companies that insured loses against those securities took a big hit.

    Then…to make matters worse…the Banks who were playing the game started crashing and FDIC had to jump in and virtually all of their funds were exhausted.

    For the first time…this morning on MSNBC, Fox, and CNN…their financial correspondents were using the word “Depression” with the screen behind them showing the points dropping as fast as a slot machine spinning…and when I last looked, there was a 400 point drop and the market was at 8095. That’s a 5000 point drop in what seems like almost overnight! That’s nearly half the value of our nation’s businesses…KaBooM…gone!

    8.3 Trillion in our nations wealth, but even worse….operating capital for thousand of companies have just dissolved into thin air…and though the total lost is noted to be over the few last years…and in just the last week…nearly a third of that has vanished.

    Remember…the nations consumer debt was about 7 Trillion in 2001 and today is nearing 13 trillion. The national debt in 2001 was about 5.7 Trillion and now is nearing 11 Trillion.

    Over the past 7 years…there was an approximate growth of 4 trillion. Most of that just disappearing in the last 72 hours.

    This debt didn’t happen by accident. Unless the market is shutdown…kind of like in 1987 and trading is completely suspended…man, I fear what might happen.

    Our government has finally shit in their peanut butter…and now it’s trying to put it on the grocery shelves for the American consumers to eat.

    We need to stop persecuting our government and Wall St, and start prosecuting. People need to go to prison…a lot of them.

    I know a lot support McCain, and most won’t accept that members of Republican Party wrote and or supported(created) most of the legislation that has led to this momentus time in history…but I urge all to look that the Congressional Records and spend some examination time…start adding up the realities of what’s happened. A good place to start is looking at Sen. Phil Gramm’s Bill (1992-3) that is so linked to allowing the “Derivatives Game” to play a major role in lending institutions…and deregulations that allowed mortgage loans to be converted into securities.

    The claims that Bush in 2003 begged Congress to do something about Freddie Mac and Fannie Mae…and his solution had everything to do with shifting control of those companies from Congress to the Executive branch (Treasury Dept)…which in the end, would have laid the total budren entirely on the taxpayers. But even worse…Bush would have had 100% control over them…as he is the supreme boss of the Treasury Dept. Gezzzzz, makes me shutter to think.

    McCains Act of 2005 would have shift the power in the same way, but all he did was soup us a bill written by Elizabeth Dole in the House…and it didn’t fly. But, McCain would have shutdown the auditing department that found out about FM and FM’s misreporting of profits…and would also deregulated the lending industry even more.

    Yes…both times the Dems wouldnt play ball on either of these attempts….and they clearly knew there were problems…and turned the other way and did not take any kind of action because they were fearful of the political cost to them.

    Neither the 2003 or 2005 attempts to deal with FM and FM would have stopped what is happening today, because they were attempting to initiate legislation for entirely different reasons that are mostly not related to the Market crash.

    But also remember..that the Repubs held the gavel in both houses until 2007. The Dems were being asses…for sure, but they didn’t hold all of the vote power.

    NOW…BOTH DEMS and REPUBS are CROOKED…and don’t forget it. They both have been stealing us blind for eons.

  4. Phestif  October 10, 2008 at 2:36 pm

    Mr. Richard C. Cook has a solution to the economic problem.

    Link: http://www.globalresearch.ca/index.php?context=va&aid=10508

    The problem is that EVERYTHING is being liquidated! There would be claw marks all over any implementation of a sensible plan that takes our taxpayer dollars back from the corrupt ‘global economic terrorist’ thieves that now own the real economy. Why doesn’t Mr. Cook understand that his plan makes too much sense to even be considered? It’s simply a bogus fraud that the elite world banksters in cahoots with our threatened by marshal law congress want our economy to operate independent of their fake solution. Bush knows if all this info is marginalized into just a few websites then the public remains dumbed down. The U.S. Constitution NEEDS to be HONORED WHOLEHEARTEDLY! EVERYBODY needs to get the word out there!
    Does everybody want to be forced to buy Amero’s at ten cents on the dollar?

    It’s getting crazy out there! Pray to God for a solution to stop this madness.

    Phestif

  5. woody188  October 10, 2008 at 2:57 pm

    Dale McFeatters owes us all an apology for hyping and providing support to the bailout plan as the least bad alternative. Turns out doing nothing and saving our kids tax money would have been the least bad alternative.

    Since Dale is now trying to cover his bottom with a glimpse of truth perhaps he can now tell us how our kids will be paying 66% of their taxes to debt service and how Medicare and Social Security and many other social programs will become things of the past, just like our republic.

  6. adamrussell  October 11, 2008 at 4:16 am

    Its like bailing out the titanic.

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