Stealing our hard-earned money

The Bush Administration is pushing for the United States taxpayers to bail out the financial industry to the tune of $700 billion dollars. To put that into perspective, that is $2,333 from every man, woman, and child in the United States. In addition, the Administration wants the taxpayers to hand the money over to the Fed and Treasury with no strings attached, although they are reluctantly willing to allow an oversight board with no real teeth. The Administration wants the bill passed as soon as possible, and if it is not, President Bush warned that "banks could fail", people would not be able to "send your children to college", and "millions of Americans could lose their jobs".

Given that the fundamental problem with the economy is a lack of confidence in it, isn't it interesting that Mr. Bush is publicly undermining it? In watching his address to the country, he appeared to be a bit like a used car dealer, "Buy now! The deal could disappear tomorrow! Doom if you don't!" Do we really trust the Bush Administration to administer $700 billion dollars with no oversight?

A Monday Canoe Trip

My trip back home to Ann Arbor has been going very well. I have been keeping myself very busy doing all kinds of Ann Arbor-ish activities. Today's highlight was a canoe trip on the Huron River with my friend Tracey. We started at Argo, paddled upstream to the bend at Barton Dam, and then went all the way downstream to Gallup Park. The trip was a lot of fun, although I managed to get myself rather sunburned.


The bridge at Bandemere Park


One of many cranes along the river


Geddes Pond at Gallup Park

This seems familiar

I was reading this article in the New York Times, and came across a statement with sentiments somewhat similar to my blog post yesterday:

If an activity is important enough to justify a government nationalization to prevent a default, it is important enough to be regulated. The regulators need to know what risks are being taken, and by which institutions, in time to act before a crisis develops.

Ideally, the US needs regulations preventing companies from getting too big to fail, rather than forcing significant amounts of industry to be regulated. But either way, something needs to change so that the US does not have to come to the rescue of corporations that dug their own graves.

The financial mess continues

The US Government is now in the business of picking winners and losers. A couple of days after letting Lehman Brothers fail, the Federal Reserve lent eighty-five billion dollars to AIG. Apparently, there was concern that if AIG failed, the impact would be felt across the entire financial sector. Unfortunately, this is indicative of two problems. The first problem is the concept that any particular company is "too big to fail". With capitalism, companies are supposed to be able to fail, as it is the ultimate correction for poor leadership. If a company has reached a size where it is too big to fail, then it really needs to be regulated, as the US taxpayers will be on the hook for bailing it out. Second, without clear criteria for which companies should be bailed out, it is entirely at the whim of the Federal Reserve which companies it will bail out. At the moment, the Fed seems to be acting based on perceived threats to the market. But what happens if the Fed starts factoring in political leanings or campaign contributions when it decides which companies to bail out?