I’m glad Hank Paulson is standing firm on his $700 billion bailout that he’s burdened us with. In his speech today he said that the bailout doesn’t protect every bank from failing.
Phew, now I feel better that the $700 billion is not just the first round of drinks, but rather the entire bar tab. I mean, granted, it’s a bender – but maybe it’s like a bachelor party – once in a life time type of thing. Excessive, yes. Excusable? Maybe with a forgiving bride who’s too embarrassed to say anything.
Except I’m not stupid or too embarrassed, and I hope you aren’t either.
It has quickly become clear to anyone paying attention (and finally it seems people are waking up) that the $700 billion is just the first round in this debacle. How do I know?
Well let’s look at how the fine folks at AIG who needed a tidy $85 billion loan from the Federal Reserve to keep from going bankrupt are doing.
They’re back at the front of the dole line, picking up an extra $40 BILLION to keep operations (like their half-million dollar Ritz-Carlton parties) going strong. And folks, this isn’t an exception – this WILL BE the rule. The US Government has no idea where the tab is going to go. How long did that $85 billion last AIG? Three weeks? This is not the exception, this is the canary in the coal mine. There will be more cash spewing off the presses as more and more institutions come to the dole line.
And it won’t just be banks. None less than the Govenator himself has sent a letter to the Fed asking for help keeping California from running out of cash. We’ll see states, auto dealers, airlines, large real estate companies, sovereign states like Iceland and more all come to the window looking for a little scratch to get by.
Where will we be? We’ll be the stiff with the bill, and even if our drunk friends chip in a bit they’ll always stiff you on the tip. The taxpayers go to the end of the line, go bankrupt, ruin their credit and lose their homes while the government props up irresponsible organizations (no matter their legal formation) with money that doesn’t even exist.
It is the ultimate fallacy of the bailout. $700 billion is a drop in the ocean. They can’t print money fast enough.
From CNNMoney.com on our canary in the coal mine:
The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash.
In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back.
The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.