How Much Has the Bailout Cost?

By Big Tent Democrat, Section Other Politics
Posted on Mon Nov 24, 2008 at 09:43:18 AM EST
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As the Establishment Media and the Establishment blogs intersect, I was struck by this screaming headline at TPM:

Pricetags for Bailout So Far: 2.8 Trillion

That headline is bolstered by a post by David Kurtz that states $7.4 trillion has been spent on bailouts. The link goes to this Bloomberg story. What does that story say?

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

(Emphasis supplied.) $2.8 trillion already tapped? I simply do not believe that is true. And a review of Bloomberg's math proves it is not true:

Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort.

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

Let's stop for one second - is Bloomberg reporting that the Fed has bought $2.4 trillion of commercial paper? If so, that is front page news. I believe it is not true. Instead, I believe the truth is the Fed has the authority to purchase $2.4 trillion worth of commercial paper. But the fact is that the total outstanding amount of commercial paper is $2 trillion (and of that amount only $1.3 trillion is eligible for purchase by the Fed.) How is it possible that the Fed bought more than 100% of available commercial paper? And by the way, when commercial paper is redeemed, as most of it is over a short period of time, does that still count as "money spent on the bailout?"

So it is fun to run screaming headlines, but does it really tell us the truth? Not really. More from Bloomberg's own article:

William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as “too big to fail,” he said.

Indeed. There is enough to worry about without engaging in bad scare tactics reporting. Remember, at the end of the day, the Republicans will use these scare headlines to try and block Obama's stimulus package. Here is Digby on how Neil Cavuto used these ridiculous figures for just that purpose:

Neil Cavuto and Ben Stein got into a screaming match over the state of the economy after the bailout Saturday morning on Fox's Cavuto for Business. I've never seen them go at it like that before. It started immediately when Cavuto opened up the segment by saying we've spent 2 trillion dollars so far to fix the problem, which is patently false, and Stein called him out on it. (rough transcript.)

Stein: The $2 trillion dollar number you cited at the beginning is a completely made up number, I don't know where you got it from.

Cavuto: What do you think it is?

Stein: Closer to $300 billion...

Cavuto: Oh, no, no, no, Ben I gotta stop you there... When you are supporting one institution after the other ...

. . . Stein: The Federal government is the only one that can stabilize this economy.

Cavuto: It is a slippery slope Ben...

Stein: Then otherwise we fall into a great depression. Maybe not a problem for you, but a problem for everybody else.

Cavuto: Oh, stop the nonsense.

Stein: It isn't nonsense.

Cavuto: Where do you draw the nonsensical line.

Stein: We go in for as much Federal stimulus as it takes keep us out of a great depression. That is basic common sense ... We need to bail out the auto companies, we need to have a massive stimulus package. This economy is about to fall off a cliff. We need major stimulus.

On the number spent, the Bloomberg story TPM relies upon for its screaming headline says:

The government committed $29 billion to help engineer the takeover in March of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8 billion in addition to TARP allocations to bail out New York-based American International Group Inc., once the world’s largest insurer. Yesterday, Citigroup Inc. received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury Department also will inject $20 billion into the bank after its stock fell 60 percent last week.

By my math, that is $171 billion in outlays and $306 billion in guarantees (and that number is wrong by the way (the guarantee is about $270 billion.)

Here's my point - fact based reporting is essential now - especially given what President Elect Obama is planning to do (and what I believe he has to do) - spend a ton of money to stimulate the economy. REAL spending - not "guarantees."

And financial reporting is especially bad. See Brad DeLong on this subject.

By Big Tent Democrat, speaking for me only

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How Much Has the Bailout Cost? | 54 comments (54 topical)

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Companies too big to fail should be broken up (5.00 / 2) (#5)
by jerry on Mon Nov 24, 2008 at 10:13:22 AM EST

Here's what I don't understand.

In everyone of these bailouts, I am told the company was too big to fail.

Doesn't that mean that "for national economic security" we have to break the company up?

How come as part of the bailouts the companies aren't given 60 days to come up with a plan to get them down to size where they aren't too big to fail?

Ya sold me Jerry... (5.00 / 1) (#6)
by kdog on Mon Nov 24, 2008 at 10:18:50 AM EST

Break these monolith corporations up as part of any bailout. That way, when they fail they can fail without dragging the nation down with them...or so I'm told, not sure if I even buy that.


Absolutely (5.00 / 2) (#20)
by Big Tent Democrat on Mon Nov 24, 2008 at 11:04:57 AM EST

antitrust law in the US is a huge problem.

Undisiscussed. I would discuss it but I had a bad experience online when I did.

And yes, that is something I do know something about.


You mean...."Chainsaw Al" Dunlap? (none / 0) (#7)
by Fabian on Mon Nov 24, 2008 at 10:21:16 AM EST

I LIKE IT!
[LINK]

The only teeny tiny problem is:

Who is going to buy?

That's the real problem - with bad paper everywhere and credit locked up, even if we could "right size" corporations, who is going to buy the bits we are trying to get rid of?


The taxpayer silly... (5.00 / 1) (#8)
by kdog on Mon Nov 24, 2008 at 10:23:40 AM EST

the only buyer who doesn't have a choice:)


You spin them off and (5.00 / 2) (#38)
by inclusiveheart on Mon Nov 24, 2008 at 12:58:43 PM EST

create new companies. It isn't about selling to some other conglomerate which has been the standard for a few decades now.

Fun fact - John Rockefeller was rich before they broke up Standard Oil, but he became the richest man in the world when he was forced to break the company up.


Trying to remember (none / 0) (#26)
by sj on Mon Nov 24, 2008 at 11:34:23 AM EST

When AT&T monopoly was broken by Anti-trust suit, I don't think there were any buyers. The monolith was just broken up and each piece had to become self-sufficient.

When I saw Jerry's comment about breaking up corporations that were too big to fail, I wasn't thinking GM. I was thinking Bank of America and Citigroup,etc.

You know, the ones who have been getting billions with apparently no strings attached. And who (I thought I read) seem to be buying up healthy banks to create even greater monoliths rather than helping to staunch the bleeding with banks that are hurting. I don't see why they shouldn't be broken up. Why would such a step require a buyer? A buyer is just someone creating their own monolith, right?

Not being an economist, I like this idea: break them up. They're already falling apart under their own weight.


Thinking Citigroup, AIG, financial companies (5.00 / 1) (#31)
by jerry on Mon Nov 24, 2008 at 11:53:39 AM EST

Yes, me too.

I think GM should be broken up too, for similar and different reasons (how to make it more responsive to customers and get more customer enthusiasm in a bankrupt bailed out automaker).

But I am definitely thinking that all the big financial companies that require a bailout because they are too big, require a breakup because they are too big.


exactly (none / 0) (#33)
by sj on Mon Nov 24, 2008 at 12:05:54 PM EST

all the big financial companies that require a bailout because they are too big, require a breakup because they are too big.

Makes sense to me.


Since GM took my Saab model and (none / 0) (#39)
by inclusiveheart on Mon Nov 24, 2008 at 01:04:50 PM EST

made it very much a GM car, I don't really see any reason at all to buy another Saab because it isn't a Saab anymore - except for where the ignition is placed. Otherwise, it drives like a GM which isn't why a person buys a Saab.

I tell this story only because I see no point in GM or any of the others owning these specialty brands if they aren't going to preserve their specialness. I think the auto makers should be broken up at this point if no other reason than they are not offering a sufficiently diverse product line imo.


My family has always had Saabs (5.00 / 1) (#41)
by andgarden on Mon Nov 24, 2008 at 01:08:01 PM EST

But you're right, they're not the same. (Whenever I drive other cars, I still look for the ignition in the center console first, and I miss the turbo lag).


: I scared the life out of a (5.00 / 1) (#43)
by inclusiveheart on Mon Nov 24, 2008 at 01:17:22 PM EST

sailing buddy years ago when I tried to put the key in the floor of a rental car - lol
We'd sailed a lot of miles together, but he had never been in a car with me driving. He was definitely wondering if I could drive at that moment and whether he was in for it on the already fairly dangerous island roads we were about to set out on.
For a split second I thought about not telling him why I was doing that, but he just looked too scared to do that to him.

I owned a 1989 Saab 900T Convertible (none / 0) (#51)
by jerry on Mon Nov 24, 2008 at 03:37:55 PM EST

Fun, quirky, fast, bathtub of a car.


When AT&T broke up the stockholders did (5.00 / 1) (#45)
by Militarytracy on Mon Nov 24, 2008 at 01:53:26 PM EST

very well for a change. My greatgrandfather had bought in long before I was born because he believed that investing in a telephone in every home was a good investment. His children ended up with stocks in four extremely profitable companies. How I miss when Americans used to invest in things they believed in instead of expecting the stock market to be a retirement fund which only allows CEOs access to enormous sums of money they never even had to earn anyone's trust for or prove themselves worthy of the responsibility.


Some handy dandy capital injections (none / 0) (#29)
by joanneleon on Mon Nov 24, 2008 at 11:43:13 AM EST

might help mightily with finding a buyer.

Everytime I hear that phrase I can't help thinking "Don't you wish you could get a capital injection -- for free?"


: But you don't want buyers because (5.00 / 2) (#40)
by inclusiveheart on Mon Nov 24, 2008 at 01:07:38 PM EST

that just keeps this incestuous and dangerous mergers and acquisitions trend going that has yielded these beheamouth companies. Citi got that cash injection in the first round and rather than fixing whatever problems they had, they thought buying a failing Wachovia would be a good idea and then threatened to sue Well Fargo when they made a better offer.

Agreed (none / 0) (#10)
by gyrfalcon on Mon Nov 24, 2008 at 10:26:35 AM EST

but it would take much, much longer than 60 days and would need to be done very carefully-- and most importantly, not until after we're well on the way out of whatever recession we're just at the beginning of.

Everything is extremely shaky right now, and honestly, the last thing the government should be doing is anything that would dramatically increase the uncertainty. That does put us in a bind because blackmail -- break yourselves up or we'll let you go broke and die -- is the best leverage to get this done.

But you cannot -- cannot -- do it to even one big outfit like GM without awful consequences economically, and you sure as heck can't do it with a whole bunch of them right now. A healthy economy can absorb the hit, a wounded and bleeding one simply can't.


60 days to come up with a plan, and GM, ... (none / 0) (#12)
by jerry on Mon Nov 24, 2008 at 10:39:58 AM EST

My 60 days would be for them to come up with their powerpoint presentations on how a breakup would proceed. If they can get their powerpoints together in a weekend or so on what they would do with $20B, than 60 days for a break up plan should be plenty.

I do think GM can be broken up. (Caveat: I know beans about GM)

First their are the various horizontal pieces like Delco that don't make a car itself, but just make parts. And then there's the financing arm, and other service units like logistical supplies.

And then each line could be separated by itself or with a similar line into their own companies.

Economies of scale should still be present for each line as it is for a collection of lines. They should get better in fact as the horizontals split off can then compete and service the entire industry.

Ford is circulating a video of a plant in South America where on the same line, different companies (dashboard suppliers, chair suppliers, etc.) own a different part of the assembly line and they all come together in the same building covering that line and push out the cars.

The only difficulty I see in breaking up GM is the competing goals of a) breaking up GM and b) not wanting to see the union contracts tossed out.

Given a choice of three options: buy my camaro from a bankrupt GM, buy my camaro from a very shaky bailed out GM, or buy my camaro from the Camaro Company of America, I'd know I'd have greater faith in the Camaro Company of America.

(Do they still make Camaros?)


Sorry, not close to workable: (5.00 / 1) (#17)
by steviez314 on Mon Nov 24, 2008 at 10:48:30 AM EST

Delco, now called Delphi, is already in bankruptcy and has been for 4 years.

GMAC, the financing arm, was mostly sold to Cerebrus (a private capital firm who also owns Chrysler). they are in deep trouble on their own.

There are too many GM brands, whether as part of 1 company or many.

GM is NOT too big to fail; however, it may be too psychologically important to fail.


: "too psychologically important to fail" (none / 0) (#19)
by Pepe on Mon Nov 24, 2008 at 11:02:46 AM EST

Exactly. Which is something that people here that are blindly cheering on a breakup are missing.
Not only that but they have no idea of what would happen after the breakup and how autos would be manufactured in this country. Nor do they consider the economies of scale required to build cars. There is a reason that there have no been smaller independent car makers who have succeeded. I suggest that people ponder the why of that.

: GM is NOT too big to fail; See Krugman... (none / 0) (#32)
by jerry on Mon Nov 24, 2008 at 11:57:05 AM EST

Firedoglake:

* Nobel laureate Paul Krugman: "If GM goes under, which looks like a real possibility, then that's a huge blow to huge anti-stimulus program at exactly the wrong moment."
* Former Treasury Department Director Nouriel Roubini: "Giving essentially $50 billion of low interest rate loans to automakers is a way to help them... there are about 2 million jobs directly/indirectly related to the auto industry... We have no choice..."
* Digby: "You simply can't wipe out a million jobs or more as we are just going into a terrible worldwide recession. It's like telling someone they have to go on a diet when they are in the middle of a heart attack."

I think GM is dead, a victim of suicide. I think the only way to save these jobs in a meaningful way to the consumer is to break it up. Give bailout money to Camaro Cars of America AS WELL AS TO Tesla.
And throw the execs who killed the EV1 in jail, why? Because suicide is illegal, and it was their actions that led to GM's death.

A 60 day plan can say, ... we break up as so WHEN (none / 0) (#13)
by jerry on Mon Nov 24, 2008 at 10:43:07 AM EST

the economy rebounds.

But not even discussing breakups just means it will never occur, ever, and we'll be in the same fix down the road.

I also think breaking up the companies is a fair trade for their bailout as it will increase the ability of smaller players who haven't been bailed out to compete.

So they can say, within 6 months subject to the economy we're going to split up our company into the following pieces, ...


: Jerry, having them draw up plans (none / 0) (#49)
by gyrfalcon on Mon Nov 24, 2008 at 03:07:20 PM EST

amounts to much the same thing in terms of that uncertainty. Who's going to extend them credit if they don't know what parts are going to be owned by whom down the road and how healthy they might be? Who's going to buy their stock under the same scenario?
YOu gotta understand that a huge portion of our economy depends on confidence, from the consumer all the way up to the banks. People right now who are at no risk whatsoever of losing well-paying jobs are cutting way back on their expenditures just in case. That's what banks and investors have been doing, too, hoarding their cash because they don't know what's coming down the road next.
GM, or any other company, is almost instantly croaked if they're asked to come up with a break-up plan with the whole system as skittish as it is right now. A "Restructuring" plan short of break-up, however, should inspire confidence and help them get through it, and Congressional leaders are right to demand it. Whether there's enough time is another question.
I'm with you on the basic concept though. "Too big to fail" has gotta go. If Obama does nothing else but start the process in motion to somehow put an end to that, he will have been a gigantic success, in my book. We'll see.

Yeah and Axelrod (none / 0) (#18)
by Pepe on Mon Nov 24, 2008 at 10:55:14 AM EST

was a big egotistical jerk this weekend of Fox to try to throw down the gauntlet, especailly since him and Obama couldn't pitch the bailout any harder than they did. Now he is going to play tough guy with the Big Three and all the jobs and other peripheral businesses they support? Axelrod better stick to politics because he doesn't know sh*t about the economy. Why are these political strategists always unleashed on th public welfare? (read: Rove)

Obama better put a muzzle on that guy. What a sleaze bag he is. If he ends up being appointed anywhere near Obama in the administration not only will I be worried but I will have to further question Obama's judgment big time.


So you are in favor of bringing down (none / 0) (#22)
by Pepe on Mon Nov 24, 2008 at 11:08:56 AM EST

the United Auto Workers by diluting their bargaining power?

Part of what makes unions work is strength of numbers and solidarity. Breakup the Big Three and you take both of those things away from the unions.

My bet is that the unions are all for saving the Big Three.


Damned if you do, damned if (5.00 / 1) (#24)
by oculus on Mon Nov 24, 2008 at 11:15:35 AM EST

you don't.


Actually (none / 0) (#25)
by Pepe on Mon Nov 24, 2008 at 11:26:48 AM EST

Damned if you do.

People here arguing for a breakup are not even beginning to think the ramifications through nor are they even considering the economic feasibly of the idea of a breakup, which btw is not feasible.


Breaking up GM doesn't have to mean (5.00 / 1) (#30)
by joanneleon on Mon Nov 24, 2008 at 11:51:05 AM EST

breaking up the unions. We're in unprecedented territory here -- everything is on the table. A competent Congress would lay on the table whatever terms make the most sense, no matter how drastic, and say take it or leave it. When you're dishing out billions and trillions, you should be able to call some shots! If they said the auto workers unions had to be preserved, they could do it.

If these bailouts are going to happen, I believe we should think a bit more broadly about them and get some things that we want/need. Why are we assuming that have no power as we give out huge sums of money?


Look up my post (none / 0) (#37)
by Pepe on Mon Nov 24, 2008 at 12:55:33 PM EST

in this thread on why unions work. If you breakup the companies you also breakup the reason unions work.

Besides who other than here is talking about breaking up the Big Three? It's a silly topic with no basis in reality.

The worse thing Obama could do in his first year is to let the Big Three fail.

You seem to not understand the ramifications on people and the economy and of our economic viability in the world if that were to happen.


I grew up (5.00 / 2) (#42)
by joanneleon on Mon Nov 24, 2008 at 01:11:36 PM EST

in a union household and have many family members who are union members. I'm pro-union, Pepe. What I'm saying is that we all should broaden our horizons. You're thinking too narrowly. With the money can come legal terms that require that the unions not be broken up as a result of a, call it restructuring, of an auto company. Let some new players in the game too.

There's a huge potential demand for cars in this country -- cars that are more efficient and/or cars that use alternative fuels. One of our companies could capture that demand. If they were given the incentive to change really quickly, started making hybrids and such really quickly, and the government kicked in and gave incentives for buying those cars, the number of jobs in the auto industry could grow enormously. In some cases, boot out some of the obstructionists who killed the EV1, for example, and bring in some new blood. Where there is good progress, perhaps in the Ford company, help them get further quicker.

There are a lot of things that could be done with a bailout to the auto industry, but letting them stay as they are, not requiring big changes, and not thinking big and creatively, is a huge mistake.

Think big. Think of what we could do, and when I talk about this I am including the unions in the plans.


: Once you fragment (none / 0) (#44)
by Pepe on Mon Nov 24, 2008 at 01:42:52 PM EST

the union membership into smaller companies it is easier for management to chip away at the union. Employees in independent companies will have different ideas on their individual needs. That is why the unions who try to unionize individual companies as they are doing today are not as successful or powerful as the unions of old. The UAW is one of the last of a breed and your idea would take them in the direction of the weaker unions of today.
As for new players in auto manufacturing, if it was feasible then we already would have seen it. There was plenty of capital around for someone to startup a new American company to compete with Japan like the Big Three were not. But because of the Economies of Scale it is not feasible. It takes volume to survive as a car maker and a small targeted company just cannot sell the volume to survive. It also takes volume to be able to build the cars at a competitive price. Again a small company just cannot do that. I've been in manufacturing. I had to grow larger than I wanted to just to be able to produce at a competitive price. And mine was a much more simple operation than auto manufacturing. I really don't think it could be done in the auto industry.
Look at Chrysler who is now owned by independent investors. They couldn't sellout to the Big Three so they tried to find buyers for pieces of the company and have failed in doing that too. The reason they can't is that small companies cannot survive in the industry because of Economies of Scale. It's really that simple. Again if smaller independent companies were economically feasible and potentially profitable then we already would have seen some. And that is not to mention the huge amounts of investment capital it would take to buy up a piece of a factory and then the working capital to run production and then the additional capital to finance the cars for the dealerships. That is why people in the know are not even talking about breaking up The Big Three. They know it is not feasible.
Which is why the smack Obama was talking today was idiotic. In capitalism the big money industries are sometimes going to dictate what the government is going to do. In this case Obama holds no power over the Big Three, they hold power over him. The reason for that is because Obama cannot afford to let them fail for so many reasons. The Big Three knows that. Obama will soon find out that fact for himself.

Much of the true cost will be unknown for a while (5.00 / 1) (#9)
by steviez314 on Mon Nov 24, 2008 at 10:25:53 AM EST

since none of the gov't actions have actually been "bailouts". Instead, the gov't has become the investor of last resort--commercial paper, preferred stock, warrants.

If the gov't actually did its accounting the way companies do, these actions wouldn't even increase the deficit. They are considered investments, not spending.

Of course, when things turn around, and the Fed and Treasury actually get to sell or redeem their investments, hopefully they will then reduce their Treasury Note & Bond borrowings by a like amount..otherwise, the deficit will increase.

: Thanks for a sensible post (none / 0) (#23)
by Pepe on Mon Nov 24, 2008 at 11:13:08 AM EST

it's nice to read logic.

: My understanding (none / 0) (#50)
by gyrfalcon on Mon Nov 24, 2008 at 03:10:57 PM EST

is that they don't go into the deficit for the government, either. As you say, they're investments. They only get added to the deficit when the assets are sold at a profit or loss, then it gets added.
But I may well have some of my terms wrong here, so correct me if I'm mixing deficits and debts.

Bernanke refuses to answer (5.00 / 3) (#27)
by joanneleon on Mon Nov 24, 2008 at 11:39:02 AM EST

Bloomberg filed a lawsuit to find out how much money the Fed is lending and to whom, and what assets they are using as the kind of solid collateral required for such loans. Bernanke refused to answer the question again in a Congressional hearing last week. The only thing he would say is basically that the loans are very safe and details should remain a private matter. I'm pretty sure a firm like Bloomberg wouldn't go to these lengths if they didn't know something smelled, big time, about these deals.

There have been relatively few people calling attention to this in the past couple weeks. I was watching the hearing and Bernanke was clearly uncomfortable with the questions about it.

Check out this article:

Who's Getting $2 Trillion In Fed Loans?

I think the bailout (TARP) numbers and the Fed loan numbers are getting mixed together. But until Bernanke is more forthcoming and transparent, this is going to continue to happen, IMHO. He and Paulson, when on their knees begging for money (well, okay, only Paulson got down on his knee) pledged to be open and transparent, and have since decided to be decidedly opaque on both the TARP and the Fed loans.

By throwing out these numbers, Bloomberg may be pressuring Bernanke to talk.

It's not exactly a screaming lie though -- the Fed money we're talking about is also taxpayer money, and when they use the word "bailout" they're not necessarily talking about the TARP, they could be talking about a larger bailout. Clearly that's what's happening here. It's not just the $700B that's being used to "rescue" Wall Street and the banking industry.

: Yup.........and this is why we can't (5.00 / 1) (#52)
by Militarytracy on Mon Nov 24, 2008 at 04:10:16 PM EST

get a real headline that makes sense and that everyone can understand.

Can we now topple the (none / 0) (#1)
by Stellaaa on Mon Nov 24, 2008 at 09:48:44 AM EST

statue of Adam Smith and Friedman?

You're right! (none / 0) (#2)
by Robot Porter on Mon Nov 24, 2008 at 09:53:26 AM EST

This also means doing stuff the MSM will not like.

The bloom will go off his media darling rose.

Obama has never had a full court media press against him. So I don't know how he or his people will handle it. Very few politicians can stand up to it.

But at least Hillary will be around to offer some advice on this.

How much has it cost? (none / 0) (#3)
by kdog on Mon Nov 24, 2008 at 10:02:17 AM EST

I don't think we'll ever know...the state is good at the fuzzy math...we don't even know how much the CIA rips through every year for certain.

But I have a haunting feeling our grandkids and great grand kids will find out...the hard way. We're not preventing a collapse, we are merely postponing it till after our deaths. We are the "me me me" generation.

If you want to take the long long view (none / 0) (#11)
by Faust on Mon Nov 24, 2008 at 10:35:55 AM EST

Civilization is ALWAYS postponing the inevitable collapse. Kind of like part of living is trying to prolong your life and avoid the inevitable death.


I guess.... (5.00 / 2) (#14)
by kdog on Mon Nov 24, 2008 at 10:45:00 AM EST

that is one way to look at it.

Still feels like we're wasting an opportunity to change the way we do business, an opportunity to see to our long term health as a nation and a civilization, instead choosing to artificially prop up a failed model to squeak out a few more years or decades before the sh*t really hits the fam. We're doomed for a repeat if we keep high finance as the bread and butter of our economy...aka moving money around.


: Well I agree with that generally. (none / 0) (#35)
by Faust on Mon Nov 24, 2008 at 12:16:09 PM EST

I hate trickle down Bullshytt as much as the next sane person.

7.4T not B (none / 0) (#4)
by jerry on Mon Nov 24, 2008 at 10:09:04 AM EST

: Thanks Jerry (none / 0) (#21)
by Big Tent Democrat on Mon Nov 24, 2008 at 11:06:41 AM EST

Fixed.

Whenever I see these numbers, I have (none / 0) (#15)
by andgarden on Mon Nov 24, 2008 at 10:47:01 AM EST

two points of comparison: 1) the Bush tax cut, which the CBO projected at one point to cost $1.6T; and 2) the war in Iraq, which costs us $100B every 6 months.

We're at that order of magnitude with the bailout right now.

How is it possible to buy more than 100%? (none / 0) (#16)
by jerry on Mon Nov 24, 2008 at 10:47:56 AM EST

If you look at the numbers, we basically bought 140% of AIG, until they claimed a do-over on the terms.

This is the new economics, as written by Professor Max Bialystock.

I am sure if it were necessary for the bailout to buy more than 100% of the available commercial paper, we'd find a way! (Why do you have such little faith in American Innovation?)

no such animal as a company (none / 0) (#28)
by cpinva on Mon Nov 24, 2008 at 11:42:37 AM EST

"too big to fail". it's a fraud, created to support that which would ordinarily be laughed out of the building. companies, small, large and gargantuan, fail all the time. it's a risk you run in business. unfortunately, that risk applies to both employer and employee. oddly enough, the world continues to spin on its axis afterwards.

should the "big 3" auto makers fail, life will go on. eventually, those displaced workers will either find other jobs, with other auto makers, be re-trained for different fields, or not. i don't mean to sound callous, but what makes them any more special than any other employee who's lost their job?

while it's true that car manufacturing is capital intensive, it's also become highly mechanized: robots do at least 50% of the line work. as well, these manufacturers aren't the only game in town, practically every foreign maker has plants in the US. it so happens, they also make vehicles that people actually want to buy. odd confluence there.

so no, if GM fails, the country won't collapse. many people will be devasatated, but they are a drop in the bucket, relative to the population as a whole. pumping billions of dollars into companies who've demonstrated an inability to keep up with their real market, vs their fantasy one, strikes me as a total waste of money.

Can we now topple the statue of Adam Smith and Friedman?

just friedman. adam smith has been rolling in his grave since reagan. go read "the wealth of nations", it doesn't advocate what the republicans would have you believe it does. smith has gotten a bad rap.

: Good call... (5.00 / 1) (#34)
by kdog on Mon Nov 24, 2008 at 12:12:38 PM EST

sticking up for Smith...we never gave his economic philosophy a chance because it is so difficult to rig a truly free market...and that is what those who call themselves "free marketeers" really want...a rigged market. A free market might actually serve the populace as a whole...and we can't have that, now can we?

All these posts about breaking up GM are silly (none / 0) (#36)
by steviez314 on Mon Nov 24, 2008 at 12:17:45 PM EST

Some companies can be broken up. Banks can be broken up by type of business (commercial lending, investment banking, trading) or geography.

AT&T was able to be broken up by region.

On what basis can GM be "broken up"? By brand? By geography? Sure, let's duplicate marketing, personnel and other management functions. Let's eliminate the scale of economies in factory production and parts ordering. By line of business? Sorry, all they do is make cars.

Maybe some brands should be eliminated or attempted to be sold off to foreign car manufacturers. But just breaking them up into separate companies? Nonsense.

How about GMAC? (none / 0) (#47)
by ding7777 on Mon Nov 24, 2008 at 02:19:17 PM EST

: GM Sold 51% of GMAC to Cerberus 2 years ago. (none / 0) (#48)
by steviez314 on Mon Nov 24, 2008 at 02:41:20 PM EST

Smartest thing they may ever have done.
Between GMAC and Chrysler, Cerberus is in deep doo-doo. Ever since they named John Snow as their Chairman, it's been downhill for them. Karmic Justice.

Why, oh why can't (none / 0) (#46)
by ding7777 on Mon Nov 24, 2008 at 02:13:31 PM EST

Brad DeLong have a better designed web page?

As an instructor, Brad's goal should be effective communication of his subject matter.

I may never recover from (none / 0) (#53)
by Militarytracy on Mon Nov 24, 2008 at 04:12:59 PM EST

this agreeing with Ben Stein thing I have going on right now.

BTD right again, but... (none / 0) (#54)
by pluege on Mon Nov 24, 2008 at 07:18:35 PM EST

This is absolutely true:

Here's my point - fact based reporting is essential now

Unfortunately it won't happen because there are a lot of people - republicans in particular - with agendas and no shame in taking advantage of a crisis to promote their agenda against the good of the country. This is the financial equivalent of the aftermath of 911.