Bailout Blunder

Wow. It only is getting worse. And I do not mean the economy. How poorly can the government screw up the system?

Maybe I am a Libertarian after all, as I am feel some serious cynicism towards the whole debacle.

I will share with you how I got here.

First as the banking system started to implode, rather than letting efficient capital markets *and Darwinism* guide us through the turmoil, we decided the industry was ‘too important’ so the government stepped up to the plate.

Swing and a miss…. Strike One!

If the US is the world proponent of democracy and capitalism, why is it when a company performs poorly, and takes untoward risk, the government rewards that risk…. By buying it out.

Now we have set a dangerous precedent that any industry that feels it is an essential part of the economy can head to the government for a ‘get out of jail’ card when it screws up to the point of collapse. Sweet…. Now those companies can take any absurd risk desired in swinging for the fences for that proverbial home run. The US government has guaranteed them at least a ‘walk’.

Why do you think that the car companies, housing companies, etc are coming, tin cup in hand, to the government’s doorstep asking for their share of the pie…. Heck, some are bold enough to ask for a new pie to be baked.

Second, after the government says ‘no mas’, this past weekend they decide ‘mas’. Citigroup is just too important.

Swing and a miss…. Strike Two!

Amazing that the government turns around that quickly on its own stated policy and will bail out a company if that one company is ‘too important’. Too boot, the government agreed to bear the burden (thanks to you and my tax dollars) 90% of the toxic assets valued at $300B… no not a typo at million… yes billion!

So this means that a) the government WAY undervalued the bailout plan, if one company is 43% of their total plan, and b) if a company can prove that it is vital to the economy, it can break any rules/guidelines the government has set in place.

Hello Wal-Mart, Microsoft, Exxon, and City of New York. Spend any amount you want on any absurd project. Don’t worry. The government has got your back! Want to invest in that first project for life on Pluto (the non-planet, planet)… go ahead. The returns just might be great. If not, you can just offload that project to the US citizenship.

Then just this morning, I see that the US government is announcing a new program today to ‘ease’ credit for things like auto loans and credit card. Hmmm… so we are encouraging people to go MORE into debt that we already are.

Amazing! The middle class American family spends more than it makes…every year. As a population, we are in debt. Now the government wants each person to be able to go more in debt. Wonderful idea. Rather than encourage positive behavior, just throw more fuel on the fire. Why will GM, Ford and Chrysler have to change their strategies and plans, if the government is going to enable consumers to get more bad cash to invest in poorly made vehicles?

Here comes the sinking fastball. Stepping into the pitch… oh, well… they can give themselves a free base. Swing away.