Have The Bailouts Made Sense?
Scott Bannon
May 26, 2009
Like many Americans, I've spent more than six months now trying to wrap my head around the convoluted state of our economic condition. But when they speak of trillions of dollars in debt and deficits, then follow that with hundreds of billions in bailout funding for the very same companies and people we are told created the worst of our financial problems in the first place, I realize that the abstracts of national and global economics are probably beyond my ability to comprehend; and I've come to suspect they're beyond the grasp of most so-called experts too.
So, as I often do with complex and "big picture" puzzles, I decided to boil this down to a simple question. While this approach may appear to be too simplistic for such issues, or even silly to some, the fact is it has served me well on every large issue that I've ever wanted to come to terms with.
In this case the big picture questions for me have to do with handing taxpayer money over to the businesses and people who ran their own accounts into the red with the expectations that they'll do better, or be more careful when dealing with our money.
But this can get murky quickly when you begin weighing ideas like "those who exploited the system are the best suited to fix it" against the notion that we live in a nation of laws where those who cheat and steal should never be rewarded.
So, I've boiled it down to a simple yes or no question that I could understand and find the answer to myself, "Has bailing out these financial institutions that were 'too big to fail' improved the quality of life for most average Americans?"
On the surface it can be said that the bailouts have prevented higher job loss numbers over the last six months. Though when you look at this closely it appears most of the jobs directly saved by the bailouts are held by the people who caused the problems--so, do we really care? The hard working taxpayers who funded the bailouts have still been losing their jobs by the thousands every week.
Another large part of the reasoning for the bailouts was to stimulate the economy by relaxing credit and increasing consumer confidence. I'm still waiting for sustained signs of any of this.
I also decided to look at the end users for the companies that the bailouts have saved. Have any of the borrowers, retirement investors or insured substantially benefited because we kept the companies they were dealing with in business?
And that brought me to the case of Heather Yanosko. A young mother of seven from Pittsburgh, PA, Heather finds herself in danger of losing her family home after learning that her husband, who had walked away from his family, hadn't been meeting the terms of their separation agreement and paying the mortgage.
Desperate, Mrs. Yanosko contacted Bank of America hoping to save her family home. The said that they could work with her to bring the mortgage current if she jumped through several hoops, including getting a court to add her to the property deed.
Heather did as requested and petitioned the courts, which ruled in her favor and had her name placed on the deed as well as granting her power of attorney over all matters pertaining to the property.
Mrs. Yanosko then borrowed the thousands of dollars needed to meet the terms Bank of America had given her for bringing the mortgage current, but when she went to pay them was told "No thank you, we don't want your money, we're going to auction the property off next month."
I've heard a lot of complaints and deflections from supporters of the bailouts over individuals who over-borrowed and didn't pay their debts being a large part of the problem, but here we have a woman who wants to pay her loan and save the home of her seven children, and Bank of America (who has received more than $45 billion in taxpayer bailout money) is refusing to honor the deal they made with her; and refusing to accept her payment. A more in-depth reporting of Mrs. Yanosko's battle with Bank of America can be found at PittZine.com
After looking at my question from multiple perspectives I've found it impossible to see where any of the decent, hard working Americans who funded the bailouts have seen any sort of benefit or improvements to their quality of life from doing so.
So, as I often do with complex and "big picture" puzzles, I decided to boil this down to a simple question. While this approach may appear to be too simplistic for such issues, or even silly to some, the fact is it has served me well on every large issue that I've ever wanted to come to terms with.
In this case the big picture questions for me have to do with handing taxpayer money over to the businesses and people who ran their own accounts into the red with the expectations that they'll do better, or be more careful when dealing with our money.
But this can get murky quickly when you begin weighing ideas like "those who exploited the system are the best suited to fix it" against the notion that we live in a nation of laws where those who cheat and steal should never be rewarded.
So, I've boiled it down to a simple yes or no question that I could understand and find the answer to myself, "Has bailing out these financial institutions that were 'too big to fail' improved the quality of life for most average Americans?"
On the surface it can be said that the bailouts have prevented higher job loss numbers over the last six months. Though when you look at this closely it appears most of the jobs directly saved by the bailouts are held by the people who caused the problems--so, do we really care? The hard working taxpayers who funded the bailouts have still been losing their jobs by the thousands every week.
Another large part of the reasoning for the bailouts was to stimulate the economy by relaxing credit and increasing consumer confidence. I'm still waiting for sustained signs of any of this.
I also decided to look at the end users for the companies that the bailouts have saved. Have any of the borrowers, retirement investors or insured substantially benefited because we kept the companies they were dealing with in business?
And that brought me to the case of Heather Yanosko. A young mother of seven from Pittsburgh, PA, Heather finds herself in danger of losing her family home after learning that her husband, who had walked away from his family, hadn't been meeting the terms of their separation agreement and paying the mortgage.
Desperate, Mrs. Yanosko contacted Bank of America hoping to save her family home. The said that they could work with her to bring the mortgage current if she jumped through several hoops, including getting a court to add her to the property deed.
Heather did as requested and petitioned the courts, which ruled in her favor and had her name placed on the deed as well as granting her power of attorney over all matters pertaining to the property.
Mrs. Yanosko then borrowed the thousands of dollars needed to meet the terms Bank of America had given her for bringing the mortgage current, but when she went to pay them was told "No thank you, we don't want your money, we're going to auction the property off next month."
I've heard a lot of complaints and deflections from supporters of the bailouts over individuals who over-borrowed and didn't pay their debts being a large part of the problem, but here we have a woman who wants to pay her loan and save the home of her seven children, and Bank of America (who has received more than $45 billion in taxpayer bailout money) is refusing to honor the deal they made with her; and refusing to accept her payment. A more in-depth reporting of Mrs. Yanosko's battle with Bank of America can be found at PittZine.com
After looking at my question from multiple perspectives I've found it impossible to see where any of the decent, hard working Americans who funded the bailouts have seen any sort of benefit or improvements to their quality of life from doing so.