The Pigeon on the $700 Billion Bailout
AP, Andrew Taylor: Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort,
lawmakers investigating the company's meltdown said Tuesday. The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.
The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers were still enraged over thousands of dollars spent on catered banquets, golf
outings and visits to the resort's spa and salon for executives of AIG's main U.S. life insurance subsidiary. "Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," House Oversight Committee Chairman Henry Waxman, D-Calif., scolded the company during a lengthy opening statement. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation." CONTINUED
First, a lesson: Bailout 101: a rundown of key provisions of the financial rescue plan
With that, I've been waiting to comment on the economy for a while now, although I did share some dour commentary last January.
So, what did the pigeon do with his rebate check? It's still in the bank. Rather than running out to buy the latest trinkets, I've been saving it for my (hopeful) move this summer. Perhaps I'm unpatriotic for not buying stuff, but I've gotta think ahead.
But our economy relies on folks not thinking ahead. Indeed, let me paraphrase a quote from Goodwill I read in the paper this morning: "We depend on consumer culture for donations" (Italics mine).
Am I angry? Yes and no. Am I worried? Yes and no. Let me explain:
I'm angry and worried because I'm in a job where I have to move every 3-4 years. Just over two years ago I buy my first house: a roost I knew I could afford, with a regular mortgage. Yes, I know what you're thinking: why did I buy when I didn't think I could sell? Three reasons--officer housing on USAFA sucks, the Hummingbird needed an office (military doesn't care about the whole self employed thing), and I planned on keeping it as a rental.
The bad news is thanks to the mortgage/credit debacle my roost has lost about $10K in value--$10K I can't afford to lose (but a far cry from folks who've lost 6-figures of value in markets such as D.C.). And since it's a buyer's market now--assuming they can get credit, that is--I'd need to sink another $10K in the house to make it competitive. To hell with that!
The good news: my worries in the earlier post are unfounded (for now). The rental market has held up, and my roost is in a great location. I doubt I can rent for the full mortgage, but I see this place as a long-term investment.
And "long-term" is why I'm angry, but not worried. I can rent this place. My investments are in the toilet, but I trust my diversification plan and figure I'm buying on the cheap. So far this isn't the second coming of the Great Depression, at least not as long as people still buy their lattes in the morning and unemployment remains in the single digits.
But let's not talk about me for a second:
Bailout aimed at Wall Street - poll
CNN Money.com: The government said last week's $700 billion financial bailout was necessary to help Wall Street and Main Street alike, but most Americans don't think the plan was intended to benefit them, according to a survey released Tuesday. In a CNN/Opinion Research Corp. poll, only 40% of Americans think the legislation was an attempt to rescue the economy in order to help ordinary taxpayers. Instead, 53% saw the bill as mostly a bailout for Wall Street.[but] Many economists disagree, arguing that the government was the only buyer left who could help banks from dragging their anchor. "If companies continue to write down loans, they take a hit to their capital, and they're going to make fewer loans in the future or charge a higher interest on loans that they do make," said John Silvia, chief economist at Wachovia. "Most Americans don't put the two together." CONTINUED
The Pigeon Poll backs up the assessment--not a single one of youse voted in favor of the bailout.
But wait--there's more! Where's the anger directed?
Wall Street Journal Online: Americans are fuming mad – at everyone, the poll shows. Voters were asked whom was to blame for the current financial crisis and were given options like banks, the Bush Administration, homeowners who took out loans they couldn’t afford, Congress and investment banks. Instead of choosing one of those, most respondents – 24% — volunteered the answer that everyone was to blame. “You pick up the anger that Americans are expressing regarding this issue,” says Republican pollster Neil Newhouse. “There’s enough blame to go around on this and voters have no hesitation about blaming everybody.” CONTINUED
I'm glad to see everyone hates everybody, although I'm disappointed no one is looking in the mirror. As consumers we also make choices, and sometimes our choices are wrong... although I'm still amazing at the spectacular extent of our wrongness this time.
So how does the pigeon feel about the bailout? Mixed. On one hand, the Libertarian/Free Market Capitalist in me says we all took risks, and thems the breaks if those risk chickens come home to roost (or pigeons, if you will). Take your lumps like a man, you whining bastiges! Plus, if the gov'mint steps in this time, who's to say we don't take greater risks knowing the lush pockets of the state will bail us out?
But on the other hand... will a crisis this big, can we afford letting so many fail at once? Perhaps Bernanke and Paulson are right when they say $700 billion is a pittance compared to the worst-case alternatives of doing nothing. Perhaps even Pelosi's right (yes, Pelosi with her big, googly eyes and gnashing teeth): if the bailout works it'll be a collective benefit.
But look at the polls again: America doesn't see the collective good in this. A little bit of me does, just not the part that hates big government.
Regardless of outcome, though, will this be a bad precedent?
Thoughts?
Stumble It!
Comments