Government Bailout - A Rant

[Adam]

I hesitate to post this for fear of revealing exactly where it is I work, but I'm pissed as hell, so what the shit. This is from an email sent to my company's employees today by our CEO. I've redacted all the specifics out of it, but I'm sure you can figure it out if you try hard enough.

Lending Environment

Under typical economic conditions, we would celebrate the increased demand for [our financial product] as an opportunity to extend our market leader position. But in today’s historically difficult credit environment, [our financial product] can only be [offered] at an economic loss.

We are not alone working to manage this rapidly changing environment. During the past week, several large banks, including Chase, Citibank, and Bank of America, announced steps they are taking to curtail their [similar products] until market conditions improve. In total, originators representing approximately 20 percent of [product] volume have left the business, and without a system-wide liquidity solution, those that remain will struggle to absorb displaced [product] volume.

As the industry leader, we are delivering a clear message of the need for a government solution to this issue. [Our company's] executive management team is meeting with Congress, the Departments of [blah and blah], and the Administration on solutions to the liquidity gap in the...industry. This week, [a giant douchebag], vice chairman and chief financial officer, testified before the Senate Banking Committee to urge Congress to implement a near-term, system-wide solution that will provide [product] originators with the financing necessary to meet loan demand. I have also spoken to Members of Congress about our desire to see a solution that will ensure that [customers] have access to the loans they will need for...the Fall. We believe those in Washington understand and share our sense of urgency.

So, let me get this straight, Giant Douchebag. This company used to be a Government Sponsored Entity. You and your cronies didn't like that, because it put a lot of regulations around what products you could offer and how much profit you could reap. So, over the course of the last several years, you've cut all official ties to the government, except, of course, the part where defaulting customers are covered by the government. So, socialized risk, privatized profit, business as usual, welcome to America.

It's been a fun couple of years, Giant Douchebag. Oh, the memories. Remember that time you disparaged the government's program to directly provide the service you provide? How horribly inefficient it was and how you could compete more efficiently in the market? Oh, remember that time you told us all to vote for Bush? Remember how when someone in the audience had the audacity to ask what the effect of a Kerry presidency on our jobs would be, you began your response with "Well, after the Kerry recession ended...har har har!"? Remember that?

So, fast forward to 2008, in the throes of the second Bush recession, after 9% of our work force has been laid off. How's your lean, mean, efficient pseudo-private enterprise doing there, Giant Douchebag? Oh, not so well? What's that you say, Douchebag? You need a government solution to your problems? And, what's that? A bailout?

Fuck you, Giant Douchebag. You made your bed. Go fucking lie in it.

It should be noted that I believe that the service my company offers is crucial, and the government does, indeed, need to step in and do something, but I am 100% against an expansion of the socialized risk, privatized profit racket on which my company is built. I think the government should be absorbing volume into its own, similar, program, rather than bailing out failed private enterprises who can't cut it, even with the benefit of the taxpayers absorbing the majority of their risk.

So, in summation, fuck you, Giant Douchebag, fuck you.

[Caligulette]

What was Giant Douchbag's takehome pay? Did GD take a hit, what with the company for which he made decisions taking a hit?

Or am I so wrapped up in taking hits that I have contact high?

[Adam]

Did GD take a hit, what with the company for which he made decisions taking a hit?

I think we all know the answer to that one.

ETA: Well, ostensibly he did, since he owns so much stock in the company, and our stock is in the toilet, but his salary was not, of course, reduced.

[Qingdai]

He probably got a bunch of bonuses for socializing the risk and privatizing the profits too.

Dare I say it? It seems a good reason for us being bitter.

[LadyShea]

I've been kicking around these thoughts for a while now.

I saw a conservative say government bailouts were needed because "working people's pensions" were affected by the failure of Bear Stearns, for example and that if other bank's fail more "working people" would get hurt...on accounta all the private pension funds see.

Then on Maturin's blog I was reading about how these private disability insurance companies force their insured to apply for Social Security Disability, even in cases where it is CLEAR that SSD will not be approved nor is even close.

I seem to remember some politician yammering on and on and on about how privatization of retirement funds and insurance etc. is the only way to go? Well, the private industries suck pretty hard, and end up relying on the government anyway...so why privatize at all?

[Dragar]

When you discover the technology 'corporation' in Civilisation IV, the following is read aloud:

Corporation: "Corporation, n. An ingenious device for obtaining individual profit without individual responsibility." - Ambrose Bierce

[Caligulette]

I am considering turning from bitter to biter. :sharpteethofjustice:

[freemonkey]

I seem to remember some politician yammering on and on and on about how privatization of retirement funds and insurance etc. is the only way to go? Well, the private industries suck pretty hard, and end up relying on the government anyway...so why privatize at all?

My first inclination is to guess that for some, its a way to get in, get the money and then get out again pretty quick. :dunno:

[maddog]

I am considering turning from bitter to biter. :sharpteethofjustice:
you ranggggggrrrrrrrr?!? :mad: :dawg:

#1604

[LadyShea]

I seem to remember some politician yammering on and on and on about how privatization of retirement funds and insurance etc. is the only way to go? Well, the private industries suck pretty hard, and end up relying on the government anyway...so why privatize at all?

My first inclination is to guess that for some, its a way to get in, get the money and then get out again pretty quick. :dunno:


It just pisses me off that so many Congresspeople were on board with the whole privatization thing. What if everyone's retirement was tied up in mortgage securities (Bear Stearns pension funds) or stocks based on fabricated profits (Enron, MCI) ?

Where is all the Katrina money? Who got those contracts? Why is the Army Corps of Engineers not having their guts stomped on?

I have been to New Orleans and huge stretches are still mouldering and abandoned and there is still no state of the art flood control (The Netherlands offered to help, but it's still just concrete and earthen levees I believe). I mentioned surprise at how quickly they had reopened when I visited the Aquarium there, and they told me they rebuilt/reopened on mostly private funds/donations. It seems when it came to getting new fish, the aquarium found a way to do so for less than half of what the government had contracted to pay some corporation. Because the aquarium wanted to save that several million dollars and use it elsewhere, the government wouldn't allow them to have any of the money. (unverified, told to me by the board member working there that day)

Basically as we have seen with private health care, corporations do not tend to do the right thing, be more efficient, nor do the end consumers always see the benefits of competition. When all the competitors are offering shit, you're left trying to find the least offensive shit.

Forgive my disjointed ramblings...in my mind these are all connected.

[freemonkey]

It just pisses me off that so many Congresspeople were on board with the whole privatization thing.

There are many who would like to privatize all government services, including the essentials. Like fire protection, which has been tried, and it ends up costing taxpayers more while giving them less. :(

[Dragar]

People want to privatise the fire service?! :wtfsign:

[freemonkey]

The Federal Fire Service, yes. AFAIK, it was actually tried at one of the bases out here several years ago. This was before the the bases regionalized, I think (was before we got out here). I'm afraid to say any more, because I got details second and third hand, but I understand that people lost jobs, those who got rehired got reduced pay, it cost the Navy more $$$ and it was less efficient.

[erimir]

If the concern is the "working people", then surely if the government bails out a company, allowing the CEO and such to keep their jobs, and ensuring that the company will be there to give them that big salary later without the government's help... The government should garnish the wages of all the higher ups.

CEOs don't get to get paid millions of dollars while the gov't is helping keep the company afloat. I'd be more ok with the government bailout if they did that. They need help staying in business? Then super-high salaries and profits are a luxury that the government will take in repayment.

[Qingdai]

I've always been of the opinion that there should be a maximum wage, if we have to suffer through the ridiculous minimum wage. One can't go up without the other.

[Ermintrude]

It's called capitalism. It has as much similarity to the Capitalism JS Mill or even Karl Marx wrote about as a guided misslie has to a blunderbus but the word is invoked. Strictly, we need something better than 18th and 19th century analyses for 21st century conditions, but while we are waiting for KS Robinson's Martian Utopia, we can always fill in with a mixture of Trotsky and the kind of feminism that wanted to destroy 'Capitalism' and establish matriarchal compounds, as long as it accepts men as the same as women.

[godfry n. glad]

establish matriarchal compounds, as long as it accepts men as the same as women.

Um...internal contradiction?

I don't think what you suggest can be accomplished. Perhaps I'm missing something you can explain?

[godfry n. glad]

I've always been of the opinion that there should be a maximum wage, if we have to suffer through the ridiculous minimum wage. One can't go up without the other.

I've one prerequisite: The proportions between the lowest and the highest paid employees in any given employer, public or private, should be pegged at a set amount, say 1:30. I'll entertain other proportions with rationales.

[godfry n. glad]

If the concern is the "working people", then surely if the government bails out a company, allowing the CEO and such to keep their jobs, and ensuring that the company will be there to give them that big salary later without the government's help... The government should garnish the wages of all the higher ups.

CEOs don't get to get paid millions of dollars while the gov't is helping keep the company afloat. I'd be more ok with the government bailout if they did that. They need help staying in business? Then super-high salaries and profits are a luxury that the government will take in repayment.


Um...Since they ran it into a condition which, from their view, required public assistance, then the representatives of the public interest should have the option to remove all former administrative and managerial personnel and reassign them within the firm, or allow them to leave...without a golden parachute.

[godfry n. glad]

I seem to remember some politician yammering on and on and on about how privatization of retirement funds and insurance etc. is the only way to go? Well, the private industries suck pretty hard, and end up relying on the government anyway...so why privatize at all?

My first inclination is to guess that for some, its a way to get in, get the money and then get out again pretty quick. :dunno:


It just pisses me off that so many Congresspeople were on board with the whole privatization thing. What if everyone's retirement was tied up in mortgage securities (Bear Stearns pension funds) or stocks based on fabricated profits (Enron, MCI) ?

Where is all the Katrina money? Who got those contracts? Why is the Army Corps of Engineers not having their guts stomped on?

I have been to New Orleans and huge stretches are still mouldering and abandoned and there is still no state of the art flood control (The Netherlands offered to help, but it's still just concrete and earthen levees I believe). I mentioned surprise at how quickly they had reopened when I visited the Aquarium there, and they told me they rebuilt/reopened on mostly private funds/donations. It seems when it came to getting new fish, the aquarium found a way to do so for less than half of what the government had contracted to pay some corporation. Because the aquarium wanted to save that several million dollars and use it elsewhere, the government wouldn't allow them to have any of the money. (unverified, told to me by the board member working there that day)

Basically as we have seen with private health care, corporations do not tend to do the right thing, be more efficient, nor do the end consumers always see the benefits of competition. When all the competitors are offering shit, you're left trying to find the least offensive shit.

Forgive my disjointed ramblings...in my mind these are all connected.


Not only all that, but now gangs of "investors" are buying into many troubled corporations, looting the assets for other ventures and allowing the firm to go down the tubes...generating tax benefits as write-offs against those other ventures.

Now, "developers" have learned to do this with municipalities...Telling beautiful lies and committing towns and cities to projects which either won't fly, or won't fly without the municipal taxpayers either underwriting the venture, or bailing out the idiotic "developers" when it happens to go bad. It's asset looting.

[erimir]

Um...Since they ran it into a condition which, from their view, required public assistance, then the representatives of the public interest should have the option to remove all former administrative and managerial personnel and reassign them within the firm, or allow them to leave...without a golden parachute.Or that. I'm not attached to any particular way of doing it.

Just saying that if government bailouts are "for the workers, of course", then the executives shouldn't be benefiting more than the workers. I dunno the best way to go about that but government bailouts would be acceptable if they really were about helping the "little people" rather than allowing the executives to keep getting millions of dollars a year.

[Caligulette]

My ass. If government bailouts are for the workers, then why are so many so often let go when they occur? Meanwhile the CEO's etc get their fat share- including any profit from stocks which rise as "cost cutting" (read "job cutting") measures are taken. And that is taxed as Capital Gains, not income, which is a much higher rate, so it's not as if the government is getting it back.

[Adam]

My ass. If government bailouts are for the workers, then why are so many so often let go when they occur? Meanwhile the CEO's etc get their fat share- including any profit from stocks which rise as "cost cutting" (read "job cutting") measures are taken. And that is taxed as Capital Gains, not income, which is a much higher rate, so it's not as if the government is getting it back.

Bailouts aren't normally even presented as being "for the workers", as far as I know. Bear Stearns got a bailout to avoid a ripple effect on the rest of the economy if they fell, AFAIK, and in my company's case, if we get a bailout it will be because our product (oh, hell, if you haven't figured it out yet, our product is student loans) is crucial to our customers.

In any case, if the service is so crucial that the government will always bail us out, where is the incentive for our executives to behave responsibly?

[Caligulette]

The airline bailouts were- among other things. Bear Stearns' was presented perhaps more honestly.

[1Samuel8]

In any case, if the service is so crucial that the government will always bail us out, where is the incentive for our executives to behave responsibly? Furthermore, if the service is so crucial, why not just have the government hand the money directly to the students? and avoid [your company] altogether?
Why do we permit [your company] to manage a loan?

I believe we are suckered into accepting too much banking and making rich men richer.

[Adam]

Furthermore, if the service is so crucial, why not just have the government hand the money directly to the students? and avoid [your company] altogether?
Why do we permit [your company] to manage a loan?

Good questions. As I mentioned above, the government manages its own program to lend money directly to students. The program was started, and did very well, under the Clinton administration, and was cut back due to intensive lobbying by my company, among others, in the early years of the Bush administration.

[1Samuel8]

I do not believe that welfare of the students is the prime motivator for this government action. These convoluted schemes aid the banks at the expense of the lowest people in the economy due to the effects of price rises and the crowding out of credit. In this case, the students are just being used politically.

Cynically, it makes perfect sense to me why it would be taken out of the government's hands because the banks make profit by collecting interest on loans. This is just one more way to send money directly to the banks before the inflation cycles through the economy and erodes purchasing power.

The lowly tax-payer scrambles for the crumbs while the banks eat at the dinner table. Prices rise or we get a "credit crunch" and then we ask for the economy to be stimulated again. We are sucked into it.

All of the "conservatives" cheer and justify this sort of thing because it "stimulates" the economy.

[Angakuk]

The sole purpose of government is to secure a safe environment for the conduct of business affairs. All other theories of goverment are simply a smokescreen designed to conceal this fact.

[godfry n. glad]

The sole purpose of government is to secure a safe environment for the conduct of business affairs. All other theories of goverment are simply a smokescreen designed to conceal this fact.

wuh?...

And all this time, I thought purpose of government was to provide the propertied elite protection of their claims to the property.

Strong government which enforces order, usually through some kind of police action, tends to be beloved by those "conducting business affairs", as it provides a reduction in the preceived risk of doing business. This is why the canard about capitalism and democracy being "natural partners" is a canard; businessmen prefer order and predictability, which are not democratic traits.

[Uthgar the Brazen]

Speaking as a real live bureaucratic schlub, I must clarify this:

The purpose of government is to spend money, in as many ways and as stupidly as possible.

[Adam]

So, here's an update, from my latest company email on the topic:

Two weeks ago, President Bush signed into law the Ensuring Continued Access to Student Loans Act of 2008, providing the Department of Education, at no cost to taxpayers, the authority to implement a comprehensive, equitable solution to the credit crunch in the student loan capital markets. Yesterday, the Department of Education shared with the community a summary proposal to address the liquidity shortage in the short term, and subsequently, to provide students, families and schools continued access to federal student loans to pay for college.

:roflcopt:

Right...

Essentially, the way this is going to work is that the government is going to buy student debt from us. Normally, we borrow money with which to make loans, then bundle up the debt and sell it off to get that money back. Thanks to the credit crunch, no one wants to buy that debt any more, so the government is going to do it...at no cost to taxpayers...because they're paying for it with sparkly unicorn dust, fairy gold, and flower petals mailed to Congress by grateful Iraqi children.

[Caligulette]

Ah- was it the fairy gold which was mistaken for yellowcake, then?

[ChuckF]

Looks like another big free market victory may be on the way: Fannie Mae and Freddie Mac (http://www.nytimes.com/2008/07/11/business/11fannie.html?hp)
Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.
..
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.

The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.

[Ensign Steve]

Um. Yay?

[Uthgar the Brazen]

Since when does this administration give a flying buck about the public debt?

ETA: wow, I was really going to type 'fuck,' but that worked out much better.