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I have written countless articles on The Slow Bleed that talk about various individual components of this immense screw up. Most of them target a horrific combination of greed and stupidity.

Recently someone sent me an article that appeared in Rolling Stone Magazine. I have to say, it is probably one of the best soup to nuts explanations of not only what went wrong, but also what is still going wrong. The article is a bit long, but certainly worth reading; and probably more than once. When your done, let me know what you think.

The Big Takeover by Matt Taibbi.

 

It’s over — we’re officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

 

Read the Rest Here

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A few billion here, a few billion there. Pretty soon we will be talking about real money. 

As much as I love to write, I am not a big fan of typing numbers. So, when it came time to writing an actual blog about where the bailout money is going to go I knew I was in trouble – lots of numbers, lots of zeros.

Luckily for me the guys at ProPublica did it all for us. Check them out (and be prepared to count lots of digits).

By Michael Grabell and Christopher Weaver, ProPublica

February 13, 10:55p.m.: This post was updated to reflect that the Senate voted for the stimulus package.

The House approved the economic stimulus plan Friday afternoon with a vote of 246 to 183, followed by the Senate with a vote of 60 to 38. Want to know what’s in it? You could read the 1,071-page gorilla that passed today. Or you could let us do the work for you. We’ve dissected the beast in two charts – one for spending below, and one for taxes.

The appropriations section of the bill details spending in excess of $311 billion for programs ranging from Pell grants for college students to clean water in central Utah to nearly $100 billion in new transportation and infrastructure projects.

See the complete list of dollars spent here.

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Q: Could we have done things differently? 

A: Of course we could have; we spent way too much money.  Sure we can blame CEO’s of banks and D.C. Politicians, because it is always easier to point a finger than look within. If the American public (in general) had not been spending in an out-of-control fashion, we may not be here.

I hate the argument it is “their fault” for giving me too much credit or “allowing” me to purchase a home I may not be able to afford – “They” shouldn’t have let me do it. Accept some personal responsibility for Pete’s sake! 

If I put someone in front of an all you can eat buffet am I responsible if they overeat? No one made the consumers go out and buy huge gas guzzling cars or flat panel TV’s they couldn’t afford. Again, personal responsibility seemed to have disappeared for a period of time. 

Could we have done things differently? Yes. We could have listened when people said, “Live within your means.” 

Q: Will the stimulus package work? 

A: That really is the million, or should I say “trillion,” dollar question. In a nutshell it is a huge gamble and I would say the odds are 50/50 (and I am trying to be positive). From the sidelines, there are a couple things that concern me when it comes to this being the end-all repair. 

For starters, for the most part, you can’t mess with Capitalism – it is survival of the fittest (or should I say “smartest?”). Think about it. In Capitalism when a bad company goes out of business due to poor management or whatever, the next company steps in and fills the void. This creates competition and opportunity. It is also good for the consumer as they have choices. But what happens when you bailout the poorly managed companies? You have gone against the natural order of things. The next company does not get to step up –matter of fact, since they are not getting government help they may go out of business.

Secondly, this is a global issue, not just domestic. If the U.S. was in an isolated situation than I might think the stimulus package would give us the kick-start we need. We are all affected by a global economy so we better hope the other countries are able to pull through as well. 

Lastly, what about the money we have already spent? Billions have already been spent (and some improperly) and it had as much affect on the economy as a mosquito hitting a Hummer on the freeway. The last report I read even mentioned we overpaid for some mortgages by as much as $78 Billion! It is one thing to pay too much for milk at the store but another when you are paying Billions incorrectly. 

Will the stimulus package work? Flip a Coin. 

Q: At what cost? 

A: Too much. To begin with, we are spending our kids and grandkids money. Basically we have spent too much for our own generation so we are now tapping into future ones. It is kind of like if you had credit cards, maxed them all out, and then got more cards in your kids name (and ran up those as well). Who is going to be able to pay it back? 

Secondly, what if we are wrong? Some politicians, and justly so, are starting to ask a very important question. Is the risk worth the reward? Remember, even if the bailout does jump start the economy, can we pay back the money? Is borrowing that much money from other countries and future generations really the smart thing to do? 

If we do nothing the consequences will be tough. No doubt some degree of a Depression. But then things will get back on track. But what if you spend a Trillion dollars and you still end up in a Depression? Then what? You come out of the Depression with a huge debt on your shoulders. 

At what cost? Probably future generations of debt (whether is works or not).

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Check out the video of Congressman Paul Kanjorski. If you want, skip to the 2:12 mark into the video for a interesting look into the situation. Follow this link…

www.youtube.com/watch?v=INAGMSARPYw

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Obama’s administration officials called Citigroup yesterday and said that perhaps the plans for its new $50 million corporate jet should be placed on hold.

The president “doesn’t believe that’s the best use of money at this point.”

Yea, I would say corporate jets, executive retreats, and remodeling corner offices is not the best use of taxpayer money right now! 

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Congressional Representatives make $174,000 a year (about $87 per hour) and the increase is an automatic cost-of-living raise. In their defense this was created several years ago and the percentage increase is below normal.

But is this the right time? 

Hey, I am not in politics (for good reason) but if it was me I might think this would be a good time to forgo the raise and show some sort of “we are all in this together” mentality. But, like I said, I am not in politics and thus far, Congress has been surprisingly silent on the subject. 

I think the whole thing really further my opioin that politicians, in general, are no longer in touch with the people they represent. How are they not in touch with the average American? 

Income –  For the most part you have to be a millionaire to even run for a Washington office. Once there they get salaries way above the norm. They are not looking for coupons or sales. 

Health Care – Their health care is covered. Millions of Americans with no health care or inadequate care would love to know what that is like. 

Retirement – Politicians have Pension plans (that actually get paid). Up to 80% of their final salary. Most Americans don’t have a clue where the money will come from when they retire. 

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Waterford has been an iconic name for over 250 years. It is the crème de crème when it comes to glassware. It seems people are cutting back on the high-end pottery (I wonder if they are selling more Dixie Cups?).

The dirt? 

Waterford is hoping to sell the company. The stock is at one-tenth of one cent and certainly its 7,700 employees are hoping for a positive outcome other than a nice dinnerware set for severance. 

Waterford is just one of many British companies feeling the pain lately. Woolworths (department store), Whittard of Chelsea (tea maker), and Royal Worcester (ceramics) are already in bankruptcy protection. 

As priorities and expendable incomes change, I suspect this is only the beginning of high-end product manufactures going out of business. 

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The bailout soup line is getting longer and longer. Heck, it is around the block. It seems since the automakers got their chuck of bailout cash that more and more groups are getting into the action. 

Now property developers and managers are letting the government know that thousands of hotels, shopping malls, and commercial buildings are headed into foreclosure and bankruptcy unless the government steps in and helps.

The industry is looking for a piece of the $200 billion the government set aside for car, student loans, and credit-card debt. 

We got it. We are all hurting. But does this qualify you for a government bailout and just when did this “you owe me” mentality start anyway? Certainly the country was not founded on it. 

If this is the new mentality than everyone should get in line… 

Starbucks Barista’s – With coffee sales down 100% and no one buying mocha-frappa-asiago coffees, your tips are way down – get in line! 

Movie Ticket Taker – Come on. Blockbuster, cable and downloading off the Internet are cutting into your  action in this time of cut backs – get in line! 

Wal-Mart Greeter – Hell, your position is downright dangerous as people push each other to find a deal on a Beanie Baby – get in line! 

Fur Coat Maker – Between the political incorrectness of buying a fur coat and the damaging economy, you must be hurting – get in line! 

Santa Claus – Gift giving is down a bazillion percent this year. That puts unforeseeable pressure on the North Pole to deliver gifts – get in line! 

I suppose I could go on and on but in light of the holiday season I will stop at this point. I just don’t get it. I don’t like the situation any more than anyone else, but I don’t think we should be bailing out those groups that couldn’t save for a rainy day. 

Feel free to ad your favorites to the list! 

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The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent. Now if that seems low to you that would be because it is. If that seems “too low” to you, you would once again be right…it is.

Basically, we are running out of room to lower rates. We are continuing to try and find a quick fix to what needs to be a correction.

Capitalism is like survival of the fittest. Or, at the very least natural selection. Weak animals disappear, stronger ones survive. Companies are the same way. Those that are well run survive; those that fall apart are supposed to fail (and let the next company step up to the plate). 

That is the way it has always been…until now. 

Now we are trying to manipulate a free market. We want the market to function by itself (free trade, etc) but now we are trying to “help” the ones that should fail. So what happens when you do this?

1. The “saved” company that should have failed will most likely still fail – you will have just wasted your money. Unless the company undergoes radical changes (which is typically unlikely) it will not survive – it is merely on life support for a while. Unfortunately, those funds supplying that life support come at an expensive price to the taxpayers. 

2. The “next in line” companies do not get their shot. Matter of fact, since they are not being helped in a newly manipulated market, they may fail. 

I still believe that we should not have done the bailouts. I think it would have been a difficult and painful decision to not bailout some companies, but it is going to hurt even more when we can’t keep feeding them money and we are a trillion dollars into it. 

If you truly believe in capitalism, you have to let it correct itself. 

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