Bail Out

The $700 Billion package that "must be done" is wrong.

The first time I heard it I was floored. I do not want to use tax payer money to cure the ills of the private sector. There is more than enough money out there to correct this market position. These companies that fail are quickly carved up and sold off efficiently enough. Even the banks that have failed and have been closed by the FDIC are opening the next business under the name of another bank.

Goldman Sach received $5 billion from a private investor and got another $5 billion through the market. Where is the problem here?

Did you know?
There are 446 billionaires in the United States according to Forbes magazine and of course many more millionaires.

With all this money that is obviously around no government assistance in necessary. What is going to have to happen is the people that actually run a company will have to have a financial stake in it as well. I am not referring to stock options that are given to them, but actual money invested in.

Just recently for example.

Washington Mutual gets seized by the FDIC. The bank was immediately sold, but the CEO of 3 weeks gets his signing bonus and severance pay to the tune of $13 million. He has not even gone through 2 bi-weekly pay cycles yet.

Now there are other instances where this CEO pay is out of hand, but this is so disgusting it is hard not to be upset and it is not even my money at stake!
Now am I the only one that thinks that there is something wrong here?

Think of it this way.

At the share value between $2 and $3* a share for "WaMu" that is between 4.3 to 6.5 million shares. You would think that this guy worked there his whole life, invested in the bank and bled "WaMu" blue.

Not a guy that just 1 month earlier was either looking for a job or working somewhere else.

No wonder the FDIC seized "WaMu" quite obviously the Board of Directors making more bad decisions.

*the value of the shares could have been lower but it was not above $3 at time of seizure.

So the value of this is- There is going to be more accountability and honesty in the financial sector. There will be a "Cleaning House" and several people will lose jobs, some firms will be eliminated, but there will always be investment and stock market.

I predict the Wall Street sector will be smaller, more humble and more ethics considerate. Well, I hope and I also hope more employee owned, so it is not others people's or more importantly tax payer money at stake.


Update 01/14/2009

Well... I will have to alter my prediction a little bit... I was thinking the federal government would stay out and observe, but I was not expecting the treasury and the federal reserve bank "hang around" at this party so long that they pick up the check.

How many "private" companies does the government have to invest in to solve this problem? How many thousand millions of dollars more? It is like Billion is the new Million.

But when you look at it this way ...

700,000 million is 700 billion.
I feel you can get a better perspective of a Billion.

Jan. 15 (Bloomberg) -- Bank of America Corp., the biggest U.S. bank by assets, may get more aid from the government to help absorb losses tied to this month’s acquisition of Merrill Lynch & Co.

the article goes on to say...

Bank of America...told regulators in December the takeover might be abandoned because of Merrill’s worse-than-expected results..
The government insisted the transaction go forward because its collapse would create new turmoil in the financial system.

Now this part kinda confuses me...Was BofA forced to buy this company? Or was this another carpetbagger opportunity? I remember Countrywide being bought and worked out in like a 20 minutes. Kinda like the Lehman Bros deal for JP Morgan.

the article goes on...

Bank of America on Sept. 15 agreed to buy Merrill Lynch, the world’s largest securities firm, after a weekend of negotiations between Lewis and Merrill CEO John Thain. The $19.4 billion transaction came as Lehman Brothers Holdings Inc. sank into bankruptcy, crippled by the frozen credit markets.

Ok...I am not on the inside and do not know all the details, but apperently this CEO of BoA did not get all the details either. I can only guess the CEO of Merrill Lynch lied...opps I mean to say ... "sold the sizzle" and closed the deal.

How come I am thinking 5000 million would just about cover this hiccup.

It hurts my brain to think about what is happening to 95% of American taxpayers. The ones who make less than .25 million dollars per year. Oh my goodness, it hurts so bad.

Here comes the check...

1,000,000 million dollar deficit. What a party... 1 trillion, a number so large it is written as an exponent. 10 to the 12th power. I have to stop now.