In a complex set of arrangements, the federal government has stepped in to stabilize the credit union industry, as reported by the Wall Street Journal. The bailout involves wholesale credit unions. They invest money for retail credit unions and provide them with check-clearing services.
During the housing bubble, these wholesale credit unions invested in subprime mortgages, and guess what? They lost a bundle of money for their clients, who are retail credit unions.
Continue reading A Bailout for Credit Unions
) has filed for bankruptcy -- which will lead to the wipeout of the United States taxpayers' $2.3 billion "investment" in the company.
At least, it was billed as an investment at the time
, which it was, in the same way that lending your crack junkie cousin beer money is an investment.
"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," Jeffrey M. Peek, CIT's Chairman and CEO, said
in a statement. "This market-based solution allows CIT to enter into the reorganization process well-prepared and positioned for a swift emergence."
Continue reading Taxpayers are, once again, the biggest losers in the CIT bankruptcy
In the past, the government has increased spending and cut taxes to spur spending during times of economic crisis.
However, Uncle Sam is now in so much debt that this is no longer a serious option. And it looks like we are going to spend another $900 billion-plus on health care reform over 10 years (a lot of money, sure, but about a third less than what Wall Street will spend on bonuses).
Continue reading Reason #8: Uncle Sam can't bail us out
There's a new day dawning out there. Some analysts are proposing that bankers should be paid in toxic assets. Among the chief proponents of this idea are Vince Farrell of Soleil Securities and Jim Rodgers of Rodgers Holdings.
Now this seems to be a fine idea. The bankers, with their greed and excess speculation, took down our financial system. The U.S. Treasury and the Federal Reserve had to pledge $12.2 trillion of your money to bail out these ... (you finish the sentence as you see fit). Can you imagine what $12.2 trillion is like? Do you have any idea what this money could have done for our country?
Continue reading What if bankers were paid in toxic assets?
The Congressional Oversight Panel reported on Wednesday that most of the $23 billion in taxpayer funds provided to General Motors and Chrysler is unlikely to be repaid. The Congressional Budget Office estimated in June that taxpayers would lose $40 billion of the first $55 billion provided to the auto industry.
The Treasury Department acknowledges that most of the $23 billion provided by the Bush Administration is likely gone forever, but added that there is a "reasonably high probability of the return of most or all of the government funding" provided by the Obama administration.
Continue reading GM insists it will repay taxpayer funds -- oh, really?
that "Citigroup Inc.
), General Motors and four other bailed-out firms subject to U.S. pay reviews cut 2009 lobbying costs 37 percent as pressure mounts from Congress and the public to rein in outsized bonuses, records show."
In a way, it's not so surprising: Now that they've gotten their handouts, they don't need to buy off public officials anymore. But what's appalling is how much -- even after the drop -- taxpayer money these companies used to lobby the government for more gifts.
Continue reading Bailed out businesses slash lobbying budgets
that "U.S. taxpayers may be on the hook for as much as $23.7 trillion to bail out financial companies, according to Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Program."
$23.7 trillion? That's an amount so large that it's almost meaningless. To put it perspective, think of it this way: There are approximately 300 million people in the United States. My dollar store calculator couldn't handle an equation that big so I had to type it into Google but it works out to $79,000 per person.
Not per family or household. Per person. If you have a kindergartner, call him in and explain that he now owes $79,000.
Continue reading Bailouts could cost taxpayers $23.7 trillion?
With all the bailout money circulating through the system, the U.S. government is fundamentally altering notions of competition. Mainly, companies that are receiving bailout funds are finding themselves with a distinct competitive advantage.
The Wall Street Journal (subscription required) reports that "Since the onset of the financial crisis nine months ago, the government has become the nation's biggest mortgage lender, guaranteed nearly $3 trillion in money-market mutual-fund assets, commandeered and restructured two car companies, taken equity stakes in nearly 600 banks, lent more than $300 billion to blue-chip companies, supported the life-insurance industry and become a credit source for buyers of cars, tractors and even weapons for hunting ... Increasingly, companies big and small are competing on the basis of their ability to tap government money."
Continue reading The oligarchy of bailouts, and why we all lose
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