Why The Bailout Won’t Work

Well, it took the addition of tons of “sweetened pork” but the bailout bill finally passed. The economy should be turning around right? Not so fast. My stocks and IRAs are still going down faster than (man I’m too old for these high school jokes)

So why aren’t things being fixed? Perhaps it’s because the bailout won’t really fix the economy.

It seems to me that the only people willing to sell off all their assets to the government at a loss are those with shitty assets. Most people who have mortgages are still paying them, so it doesn’t make much sense to sell that revenue to the government for less than it’s worth.

The people that aren’t paying mortgages still have houses. Those houses still have value (albeit not as much value as they did 5 years ago) If the bank can repossess a house and sell it for $100,000 (down from it’s original $150,000 value) they’re going to do that before they sell it to the governement for say, $70,000.

It just makes sense. As long as their assets have value, a company is going to try to get value out of it before accepting bailout money. That means, nothing is really going to change.

So who will take the bailout funds? Companies whose assets aren’t really worth anything. In other words, all the government is going to end up buying is a bunch of useless crap that they will never be able to recoup any value on. The only people this is going to benefit are the banks and investment firms who want to unload a bunch of unprofitable investments. They’re going to unload them onto the government, who will buy them with our money.

Congratulations you now own part of the Brooklyn Bridge.

In a way, that’s good. Letting the government own a large proportion of property in the country only puts us one step closer to a system like the one in place in China. Do you really want to rent your house from the government?

Another reason banks may not take the bailout is because it puts limits on golden parachutes and CEO pay. Now, I for one think that if you run your company into the ground you shouldn’t be paid at all – but unfortunately I don’t sit on the boards of any companies.

Quite simply, the same people voting whether or not to take the buyout are the very same people who would see decreased salary if they took it. Which way do you think they’re going to vote?

I’m not alone on this either. It’s obvious that many other Americans noticed this – and tried to tell their congressmen. So many in fact, that the House disabled all email from constituents. They didn’t have time to care about what we thought.

But hey, at least we got rid of that $0.39 tax on wooden arrows for boy scouts.

1 comment October 6th, 2008