The Bailouts Continue

Adding today's announcement that Henry Paulson and the treasury intend to take partial ownership of GMAC, the lending arm of GM and one of the largest consumer lending institutions in this country, the Federal government now owns a significant share in just about all areas of finance that affect our lives. These include Fredie and Fannie, for about 50% of all US mortgages, GMAC for auto and consumer loans, many large financial institutions (the Fed is still refusing to disclose the names of the financial institutions that it is handing out the 700 billion taxpayer dollars authorized by congress through TARP in October), our retirement (social security), unemployment, retirement medical care (medicare)... and you get the point. 

In exchange for the Feds investment and continued availability of cheap money fresh off the printing presses (the Fed also agreed to recognize GMAC as a bank to allow it access to billions more taxpayer dollars through TARP), GMAC has stated that it will increase availability of loans to consumers to purchase new GM made vehicles. Wow, so now we can all rush out to GM dealerships and get loans on overpriced, poorly built, uneconomical, gas guzzling American built SUVs and other large vehicles and the government will be in a round about way extending the credit to allow us to do so. This in turn will stimulate the economy and bring us out of the terrible financial mess we are in, or at least that is what Henry Paulson and George Bush want us to believe. 

The articles that I really enjoy reading lately are about all of the executives and CEOs of these banks, financial institutions, automobile manufacturers that are taking hundreds of billions of taxpayer dollars either through TARP or the FEC. Take for example, Kerry Killinger, CEO of Washington Mutual a big player in the subprime industry during the housing bubble and the largest bank failure in US history. During his tenure as CEO he pushed mortgage lending very aggressively with his "power of yes" campaign and this in turn led to the failure of the bank. But he walked away from that with a modest $100 million in salary and bonuses.... and trust me, this is no isolated story. Just about every financial institutions that has failed and/or taken money from US taxpayers via TARP including IndiMac, Freddie and Fannie, General Motors, and many others have been, and are being run by executives who continue to take in millions of dollars annually in salary and bonuses while normal employees are losing their jobs by the thousands. 

But for all of my pessimism and sarcasm, I really do fear that we are at a major turning point in the history of this country. I fear that the day of insolvency for the Federal government is imminent, and approaching increasingly faster under the reign of Henry Paulson, George Bush and our democratic controlled congress with their shortsighted "lets borrow our way out of this problem and throw out the free market principles this country was founded on" attitude. Our Federal government is living on borrowed time and borrowed money, and that cannot last forever.