Why is it OK to bailout Citi, but not auto companies?

[sugarpop]

Originally Posted by lookout123

They tried that. That is how we got into the mess we are in.

/Fed/"The market is down you say, here have some money and some nice low interest rates. Unintended consequences, you say? Baaaah, what could possibly go wrong with handing people unable to handle their money more free money? Now vote for us and go back to the mall."/chairman/

That isn't really what I was talking about... at all. But, I like this... "Baaaah, what could possibly go wrong with handing people unable to handle their money more free money?"
YES, isn't THAT what we've just done with Wall Street and the banks and all those corporate pirates?

[lookout123]

See how that works. Government interference for political reasons causes a problem so the obvious solution is for greater governmental interference.

I wasn't suggesting the government bailing out companies is a good thing, I was simply responding to your statement about giving money directly to the people.

[sugarpop]

Originally Posted by lookout123

See how that works. Government interference for political reasons causes a problem so the obvious solution is for greater governmental interference.

I wasn't suggesting the government bailing out companies is a good thing, I was simply responding to your statement about giving money directly to the people.

Yea, I got that. but it certainly couldn't have been worse. Look at where we are now. Where will it end? At least if the money had been directed to people, the toxic debt (which is supposedly what started the dominos falling) could have been paid off, and regulations could have been put back in place to make sure more of the same didn't happen. (And I don't believe THAT has happened yet.) AND it wouldn't have cost us nearly as much as we have already paid out.

Hank Paulson keeps throwing money at Wall Street, and in the meantime, foreclosures are still happening, which are what caused the problem in the first place. HELLO. Can we address the problem where it began, and not reward the people who allowed it to happen?

IMO, and granted I am not an economist, but imo, it started with deregulation. It has been proven over and over and over ad nauseum that business will not police itself. Business needs regulation, and oversight, and transparency. (and no, I am not letting Congress off the hook either.)

In addition, the HUGE massive salaries that are paid nowadays to executives is also in part to blame, imo, again, not as an expert, but as someone who has been observing this particular behavior over the past couple of decades. When all the wealth is concentrated at the top, it makes the rest of the structure less stable, kinda like with buildings (if all the weight was concentrated at the top).

[lookout123]

Originally Posted by sugarpop

At least if the money had been directed to people, the toxic debt (which is supposedly what started the dominos falling) could have been paid off

You misunderestimate the stupidity of your fellow man. The low rates and easy money they had access to for the first part of this decade should have been more than enough to allow them to pay off their debt and be in a relatively good financial place. Instead they used the low rates to buy more stuff. Then they used the low rates to refinance that stuff. Then they used the low rates to take money out so they could afford to pay the payments on the stuff they bought. And then they figured out they couldn't keep up with their snowball and started crying for the rules to change. Giving them more money only allows them to push the painful date of reckoning further down the road but in the end people must face the painful lessons.

IMO, and granted I am not an economist, but imo, it started with deregulation.

Deregulation of what? By whom? When?

I'm not suggesting there isn't a problem. I'm not suggesting Wall Street doesn't hold much of the blame. IMO Wall Street, the gov't, and the borrowers all own equal shares of the blame pie. I'm suggesting that your idea of handing money over to John and Joan Q Public doesn't solve anything to a greater degree than bailing out financial firms. It only delays the inevitable and creates a bigger problem for tomorrow.

I don't agree with bailing out the firms but I can't see any sense in going the route you're suggesting either.

[sugarpop]

Originally Posted by lookout123

You misunderestimate the stupidity of your fellow man. The low rates and easy money they had access to for the first part of this decade should have been more than enough to allow them to pay off their debt and be in a relatively good financial place. Instead they used the low rates to buy more stuff. Then they used the low rates to refinance that stuff. Then they used the low rates to take money out so they could afford to pay the payments on the stuff they bought. And then they figured out they couldn't keep up with their snowball and started crying for the rules to change. Giving them more money only allows them to push the painful date of reckoning further down the road but in the end people must face the painful lessons.
Deregulation of what? By whom? When?

Before Clinton left office, he signed a bill that Phil Gramm wrote, deregulating al lot of the things that caused this mess. I believe it was the Glass-Steagall Act that they repealed...
"If you're looking for a major cause of the current banking meltdown, you need seek no farther than the 1999 repeal of the Glass-Steagall Act.

The Glass-Steagall Act, passed in 1933, mandated the separation of commercial and investment banking in order to protect depositors from the hazards of risky investment and speculation. It worked fine for fifty years until the banking industry began lobbying for its repeal during the 1980s, the go-go years of Reaganesque market fundamentalism, an outlook embraced wholeheartedly by mainstream Democrats under the rubric "neoliberalism..."
...many economists "have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the 'finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, ' according to the Center for Responsive Politics. ' These industries succeeded in their two decades long effort to repeal the act. ' "

I believe this was also responsible for the S&L fiasco back in the 80s. But we made the regulations even weaker after that happened.

I'm not suggesting there isn't a problem. I'm not suggesting Wall Street doesn't hold much of the blame. IMO Wall Street, the gov't, and the borrowers all own equal shares of the blame pie. I'm suggesting that your idea of handing money over to John and Joan Q Public doesn't solve anything to a greater degree than bailing out financial firms. It only delays the inevitable and creates a bigger problem for tomorrow.

I don't agree with bailing out the firms but I can't see any sense in going the route you're suggesting either.

I'm not saying my idea was the best one, but I believe it would have worked at least as good as what they did, and it wouldn't have ended up costing as much. If toxic mortgages were really the problem, giving the money to people to pay the mortgages would have solved the problem, and in the meantime, the Glass Steagall Act (or some other legislation) could have been put back in place to make sure it didn't happen again.

As it is now, they can still do what they did. AND, all those lending companies are now being reclassified as banks. The money they got was supposed to be for buying up the bad debt, but Paulsen gave the money to banks instead, thinking they would rewrite the mortgages and stop the leak. But they aren't doing that. Some of them are using the money to buy other banks, or to pay dividends, or for anything other than what that money was intended for. So now we have to give them MORE money, and again, there are no real restrictions on how it can be used. If we just keep throwing money at corporations, without ANY restrictions, how is that going to solve the problem? So what we are doing, is taking from the middle class to give to the rich. It's always fine and good to bail out rich corporations who get into trouble because of bad management, when the management makes tens of millions, if not hundreds of millions per person every year. THEY never end up paying a price. IMO, they should all go to prison. This is a big fat mess. And it happened because of deregulation.