Nov

15

Financial Bailout, Wrong Recipients

By admin

You don’t want to know what’s happening with the $700 billion (with a b) bailout money that was supposed to be earmarked for large financial institution’s foreclosure and mortgage-related losses. Trust me, you really don’t. Especially if you are the type who gets mad when the leaders of your country act foolishly, irresponsibly, and with self-interest as their first priority. This is one time when it’s definitely better to stick your head in the sand. In fact I don’t even want to watch the news any more, especially financial and political news. I’m sure I’m not alone there.

The whole idea behind the bailout was to rescue large financial institutions whose exposure to the subprime mortgage business (and foreclosed properties that can only be unloaded for large losses) was threatening their existence. That’s what it was for. Unfortunately between the time the legislation passed and now, which has only been a matter of weeks, lots of other uses for the money have popped up. Gee, who would have thunk?

Bank of America already received $25 billion (with a b) of that money. Now they are a company that is in good financial health and has never been involved in the mortgage business. They have no bad subprime loans, nor do they own any foreclosed residential homes. BOA is doing just fine charging their customers every time they talk to a teller. So how did they get their hands on that cash? Is it because they have a sign that says Bank on the front of their building? Or do they know the right person somewhere?

Today on television the mayor of Philadelphia made a desperate plea to use the money to bail out city governments - in particular, his city. When it was explained to him that the legislation which allocated the funds would not allow that, he responded that they need to give him some other money then - just like the auto makers are apparently getting. When asked where the money was supposed to come from, he said (and I kid you not) The federal government are the ones who print the money - just print some and give it to us.

As a reader of this blog I hope you understand why that doesn’t work. That crazy mayor might as well print the needed money himself - it will be worth just as much as all American currency will be if the federal government starts printing money to give to every failing entity. Heck, haven’t you made some investment decisions that didn’t work out? Have the government print you some money to bail you out.

The really scary thing is, what the government is actually doing with these bailouts isn’t much different than just printing the money. The effects are going to be the same - they just don’t realize it yet. Or perhaps they don’t care what happens to the next generation in America. By spending more and more money on an unlimited credit line that they have setup for themselves, they are setting a terrible example to the American consumer. The whole system could be bankrupt in our lifetimes, not in our grandchildren’s as we are all planning on. At least consumers have a point where their credit is maxed out. Our government can just keep borrowing - and because they can, they do.

Eventually all this government borrowing and printing money will come home to roost. When it does, expect the US dollar to be worthless - not only overseas but within our own country as well. How are you set on gold coins and gold bars? You might want to stock up on them the way things are going. Either that or you will need chickens, pigs, apples, and ears of corn for currency.

Papa Riah

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