Bailouts Not Working

Written by Tony West

The first step in any analysis of the bailouts must begin by pointing out that one bailout was done by a Republican, and the other by a Democrat.

Therefore, it renders the idea of pure party-driven politics moot. The next step, then, is to look at the bailout and ask if it addresses some of the fundamental issues that have caused this financial crisis – trust.

However, this issue was already addressed on the show “D.L. Hughley’s Breaks the News” of all places, where one night he hosted Representative Barney Frank to discuss the auto bailout. D.L. Hughley recounted how he and his father bought a brand new Ford car, and then said “I swear to God, the next day we had to take it into the shop!”

Hughley then asked Frank how the auto bailout would make American car companies manufacture better cars. Frank did not have a satisfactory answer to this poignant question. He did not have a satisfactory answer because the auto bailout did not and does not repair the broken trust between American car purchasers and American car companies, nor does the auto bailout or any subsequent actions by the auto companies fix what has essentially driven them to go to Washington to beg for money. Instead it puts off the inevitable of an antiquated industry for a few months to a few years.
To extend this to TARP I and TARP II, nowhere has the failure of the financial, government and corporate system been addressed. Instead, what we have been given by our elected officials are a bunch of vague and ambiguous promises of “more oversight and regulations.”

However, I believe that it is the overall flawed system with its rules and regulations that led to this financial crisis, and that if neither one of these bailouts seeks a change in these fundamentals then the bailouts will not get America out of the current recession/depression.

Instead, the bailouts will led to further agony because the government doling out billions of dollars to banks, insurance companies, financial institutions and district pork projects will only further encourage these entities as they are being rewarded for their poor performances.

As the old saying goes, “you can fool some of the people all the time, you can fool all the people some of the time, but you can’t fool all the people all the time.”

In the context of our current economic crisis, our government telling us they will spend their way out of the recession does not mean people will believe it to be so and President Obama is essentially pouring money down the same funnel that President Bush did. Thus, the people are saving, the banks are saving and investors are moving into precious metals such as gold. Again, people do not trust the government to fix the problem. The people do not trust the bailout to fix the financial crisis.

Lending institutions and investors do not trust the markets to get better in the near or even mid-term future. Quite simply, the bailouts change nothing, and by pumping trillions of dollars into a flawed system, it encourages the poor decisions that caused the financial crisis in the first place.
Until the government makes a genuine analysis of why the country is in the financial position it is in currently, and then makes the painful and potentially politically damaging changes necessary, the fundamental trust between the people and system will remain broken and we will not see better economic times.

This entry was posted in Opinions. Bookmark the permalink.

One Response to Bailouts Not Working

  1. movietreams says:

    very interesting thanks so much for this

Leave a Reply