The Monster that the bailout has become

I believe that this news article sums up what is wrong with the government bailing out the economy.

SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

A GM spokesman has denied using bailout funds to export American jobs, but that appears to be nothing more than a bookkeeping matter. This is bad enough as it is, but it doesn't stop there by any means.

First of all, we need to get an idea of just how large the bailouts have become.

The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more....

Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

The massive theft that has happened under these bailouts seem almost beyond comprehension, roughly 2/3rd of the GDP. Imagine what we could have done with this money if it was directed at the taxpayer?
We could have completely solved the housing crisis AND still had enough money left over to have single-payer universal health care for everyone.

Instead the money got sent to that black hole known as Wall Street. How much went into executive bonuses? No one knows for certain, but 86% of the first $125 Billion in capital injections into the banks wound up in compensation and bonuses. The average compensation for Wall Street bank executives that got taxpayer bailouts last year was $2.6 Million.

And its not over yet. Now we are going to subsidize Hedge Funds.

Hoping to jump-start the financial system, the Obama administration is considering turning to a new program run by the Federal Reserve that has been a challenge to launch and depends heavily on hedge funds…

In essence, the government, which doesn’t want to buy these securities itself, is lending money to professional investors so they can buy them. In some cases, the government itself is guaranteeing payment on the loans that back these securities…

Some hedge funds, which often use borrowed money to boost returns, are lining up to get in on the Fed program, seeing a chance to make high double-digit-percentage returns with little downside using low-cost loans made on easy terms.

The loans the Fed makes to investors are nonrecourse, meaning investors can’t lose any more than the money they put upfront on the security. If a hedge fund defaults to the Fed, its collateral is the securities themselves. There also are no margin calls, meaning the Fed can’t demand additional payments of cash from borrowers if the underlying securities fall in value.

The taxpayer sure is generous to the wealthy. It's almost as if the working class doesn't know what to do with all its riches, and thus must shower the wealthy with its money.

At this point I really don't understand why Americans aren't rioting in the streets. Don't you understand that Washington is picking your pockets for the benefit of Wall Street's uber-wealthy?
It's like a grade school bully. You aren't going to be able to reason with him. He's going to keep taking your lunch money because he can get away with it. Simple as that. Except in this case, he's taking your retirement money, your savings, your house, and the clothes off your children's back. Are people really that stupid as to think that any of us are going to be able to get this money back in the future? That money will wind up in overseas bank accounts and be lost forever.

Comments

on the GM TARP funds to Brazil story

It was an Instapopulist and we had some "GM representative" claim the story is not true, but I could not find a retraction anywhere from the Brazil manager and that is a major newspaper in Brazil from where the quote originates.

I've been screaming about domestic Keynesian economics vs. this global arbitrage game for weeks now and I feel like a voice in the wilderness.

I'm fairly certain having U.S. taxpayers prop up all other global domestic economies ain't gonna work.

From the other side of the aisle

From RedState.com

spokesman Richard James replied, “I don’t know if something got lost in translation but Jaime Ardila, President of GM Brazil did NOT say that funding for GMB projects would come from the US financial aid package. GM Brazil has $1 billion in investments that have already been approved but they will be financed by our Brazilian operations through local sources.”

Just as Opel (GM’s German division) is going to the German government for assistance, GM Brazil-Mercosur is raising capital in that country.

But how is this really a denial? GM is getting billions in federal aid to cover costs in this country and, by getting that money, it will free up initiatives in Brazil.

In other words, if GM did not get the bailout money, it could not spend the $1 billion in Brazil. Why? Because the Brazil money is dependent on GM keeping the lights on. GM is dependent on the federal government keeping GM’s lights on.

thank god we all can reason

GM also has billions in new plants in India, China and has offshore outsourced 22.7% increase in advanced R&D.

So, I'd say, even with a denial, RedState is right and TARP money is only not going to Brazil through some sort of accounting magic.

The reaction is building.

You ask this question, and I assume you are not being rhetorical.

At this point I really don't understand why Americans aren't rioting in the streets. Don't you understand that Washington is picking your pockets for the benefit of Wall Street's uber-wealthy?

Well, the simple answer is "no", Americans don't understand. The reason why, though, is more complicated.

Over the weekend, I saw some cable news person running around the heartland asking how things were. People were scared, they didn't know whether they could keep their jobs, send their kids to school, etc.. In other words, they were concerned that the "American Dream" was slipping away. But a lot of these simple, hard working Americans weren't sure if the Government stimulus legislation was right!!! Yes, their schools were in dire need of repair and upgrade, towns couldn't afford cops and ambulances, bridges needed repair, they were sorely in need of good paying jobs, and all kinds of infrastructure needs were evident in their communities. But they felt these were local concerns and the federal government shouldn't be involved in helping them resolve these problems!! So, we are all in the hands of the centrists now. The wisdom of a thousand Paul Krugmans and Joseph Stiglitzes be damned.

Obviously, the disaster capitalists (neocons) picked up on this aspect of the "American" psyche decades ago and have been using this voting bloc to their advantage ever since. So, what Paulson and Bernanke started cannot be reversed now. Geithner and Summers are going "all in" on this high stakes gambit to put "humpty dumpty" back together. We are testing the axiom of the "weak link in the chain" and we know the outcome.

Eventually though, unemployment, evictions, food shortages, etc. will become prevalent enough that a mass citizen outcry will occur. What happens after that is anyone's guess.

In the meantime, I have a question. Is any of this behaviorism in anyone's Econometric model?

It's in my personal model

It is in fact the reason I contend that *any* economic system will fail to provide D-level Maslow needs for one or more individual residents any time the basic unit of the nation grows beyond 1000 individuals.

And that up to that level of an extremely small nation-village, just about any economic system will do, because all residents will be within two degrees of separation from each other.

The challenge is therefore to create an economic system that works for up to 8 degrees of separation; that's what the globalists want and NEED.

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Maximum jobs, not maximum profits.

Gov't bailout by unregulated entity

Does anyone see what is coming? Hedge funds are so leveraged up to their who's-a-what's-its ... this will just compound what the taxpayer will be on the hook for. Geesus .... what next?

It has always been about class warfare.

this is bad, bad, bad

now this is why we have conservatives believing in smaller government. This is not government this is plain ripoff.

You are right Joe, it's an insult.

At the end of the day, do these greedy fuckers think that nobody sees and understands what they have done and what they are doing. They inflated the income statements of their banks year after year after year. And they were not content to just run off with the ill gotten bonuses based on those fictitious annual reports. No, these inflated egos think they deserved all that and continued rewards. The collapse of the world financial markets has already happened but the ignorant populations haven't been told. The only thing flattering I can say is that maybe, just maybe, there are some government officials who are trying to fashion a softer landing when we crash. But I have little doubt that this sucker is going down.

Commongood

The only thing flattering I can say is that maybe, just maybe, there are some government officials who are trying to fashion a softer landing when we crash.

Haven't we heard soft -landing, skirt a recession, shallow recession all before? No, we are in for some well deserved pain and what the powers are doing is going to make it worse.
If the doctor cannot diagnose the disease correctly how can they administer the correct medicine. Right now they are busily scrambling trying to reinflate the economy ... the trouble is the treatment is being applied like this is a recession .... its not ... its a depression and the treatment for a depression is a depression.

It has always been about class warfare.