When is it time to say 'No' to another bailout?
Wake up and good morning. Okay, this should come as no surprise. Bailout -- "a rescue from financial distress" -- was declared the winner of Merriam-Webster's word of the year competition after it was judged the most looked-up word on the dictionary's Web site. "Bailout" won but it was competing against other top 10 words clearly tied to the economic crisis of 2008, including "socialism" and "trepidation" (fear) and "precipice" and "turmoil." (Image courtesy of boom2bust.com)
Is it any wonder? My fingers are so used to typing "bailout" that I'm wearing out those letter keys on the keyboard. Who doesn't want a bailout now that the federal honchos have opened the barn doors? Depending on who's talking, the government is on the hook -- in real bailout dollars or promised guarantees -- for more than $7-trillion (and counting). That's approaching half the size of the U.S. economy. If the government had one credit card to put this on, it would be melting down faster than the core of a runaway nuke plant.
Who's barking at the door for bailout funds? Well, we know the banks have already gotten plenty -- though it's not done much yet to thaw credit. The auto industry just asked anew for $34-billion. The governors are hounding Treasury to bail out their states' stretched health and economic aid programs. Foreign banks, insurance companies and businesses that think they lend money -- and thus should be banks for purposes of getting a handout -- all want a piece of the pie.
Here's a local bailout plea for auto dealerships. Raul Vazquez, a Tampa area advertising consultant, is trying to mount a grass-roots campaign for federal backing of "floor-plan" loans -- dealers' financing for the cars and trucks on their lots. "We're trying to get Congress to pay some attention to the dealer level," Vazquez, who runs SaveMyLocalDealer.org, told USA Today.
"They're trying to solve the problem in the auto industry on the manufacturing level, but that's not what consumers are scared about," Vazquez says. "They're scared when they see their local dealers shut down."
You can watch Vazquez's appeal on YouTube right here in a video filmed at the Tampa site of the world’s largest Chevrolet dealer, which recently closed due to floor planning issues.
Who, in fact, is in charge here? Oversight of the Frankenstein-assembled federal bailout is weak and behind the times. Just ask Harvard law school professor and a consumer bankruptcy expert Elizabeth Warren, who heads a new Congressional panel set up to monitor the gigantic federal bailout. In an interview with the New York Times, Warren says the government still does not seem to have a coherent strategy for easing the financial crisis, despite the billions it has already spent in that effort. She says the government seems to be lurching from one tactic to the next without clarifying how each step fits into an overall plan.
No argument here. I'm pretty sure those of us without a Harvard law degree have reached similar conclusions a while ago. Warren's oversight group has promised Congress its first report on Dec. 10, “laying out the central questions that Treasury should be addressing as it spends the taxpayers’ money.”
Now comes a new and critical report by the Government Accountability Office, the nonpartisan investigative arm of Congress, that says the Treasury Department has yet to impose necessary safeguards or decide how to determine whether the program is achieving its goals. The auditors, according to the Washington Post, said it was too soon for them to tell whether the bailout was working. Here's the entire report or, if you prefer, the highlights here.
You think the bailout's getting a bit crazy now? Wait until the new administration takes office in January. Who's going to guarantee the guarantors?
-- Robert Trigaux, Times Business Columnist