So, how's TARP doing these days?

Um...not so good for small banks that received taxpayer funds. From The Washington Post:

Big Wall Street firms have the most bruised public reputations, but it's a collection of smaller banks that continues to plague the Treasury Department's bank bailout program.

The latest report from the agency shows that more than 120 institutions - nearly all of them small banks - have missed their scheduled quarterly dividend payments, which is more than a sixth of the banks that received federal aid during the financial crisis.

In addition, five banks that received capital injections from the $700 billion Troubled Assets Relief Program have failed altogether, making it highly unlikely that taxpayers will recover the nearly $3 billion poured into those institutions.

The Treasury report showed that at the end of August, a record six banks each missed six dividend payments...

...The rising number of "deadbeat" banks, as they are known, has prompted calls for Treasury officials to take action to protect taxpayers' investment.

The bailout legislation gives the Treasury the authority to appoint two members to the boards of banks that miss six or more dividend payments, but the agency has refrained from doing so.

Strangely, you don't hear much from the crowd that thought that TARP was a great idea these days. Heck, now we have the Obama administration and Democrats pushing for a TARP-like deal for small banks to lend to small businesses. Anybody want to take a wild guess on how that ends?

Lemon capitalism

GM loses billions in the fourth quarter of 2009. Didn't the federal government "lend" GM billions of tax payer funds?

GMAC will get more tax dollars

Congratulations, dear sucker...er, citizen. Can you hear the toilet flushing? According to the political elites that have decided to "save" society for us, returning GMAC back to profitability using tax funds is the right thing to do to avert disaster. But, isn't the red alert over already? Corporatism remains as strong as ever in Washington.

Chrysler Nixes Electric Car Program

Sooo, after Chrysler lured taxpayer funds from the hands of our elected representatives, they have since decided to axe the "Green" cars that they marketed as payment for government aid. Of course, Barack Obama was quick on the draw to give aid to Chrysler partly based on its newly found "Green" conversion. That didn't last long. Once again, the taxpayer ends up being a sucker.

Ron Paul vs. Bernanke

Watch as Ron Paul poses some very incisive questions and comments to Ben Bernanke during a recent congressional hearing. Also notice how Bernanke, a very intelligent and learned man, simply does not understand that he is part of a government bureaucracy that is slowly dragging the American economy into the hands of big government power.

GM: Government Motors

The move to oust GM CEO Rick Wagoner by the Obama administration is yet another masterful stroke towards economic populism; the federal government will now apply copious political pressure to corporations and companies that bristled happily when it came time to accept bailout funds--har! har! har!--little did they know that were essentially making the federal government their hard taskmaster and overseer. The lesson is clear: Don't take tax dollars from the government. They will bend and twist your company to satisfy its political ends while making a public hanging of you and your management. Score one for Team Obama since this whole sorry episode is a clever cover for the White House to dump more public funds to the automakers with little public resistance or scrutiny. After all, getting rid of a bad CEO (aren't they all unpopular now?) in a very public manner appeases populist sentiment against the bailouts for a time.

I will repeat my call for no bailouts for auto companies: Let them go chapter 11. We could have avoided this whole mess if they were simply allowed to go bankrupt months ago.

More Bailouts Please!!

Since we have lost our minds bailing out every industry with enough pull in Washington to garner attention, let's continue with the bailouts! The newspaper industry needs a bailout because papers are going under fast. We really need to save them, right? Then there is the auto suppliers; they are a sick industry with lot's of union workers--we must bail them out because as Lo Dobbs always points out, we need more American manufacturing. Whoopee! And then there is the commercial real estate industry. Boy, those guys are hurting. We need to bail them out too. Too much credit card debt? Bailout. Bought too much car? Bailout. Your idea to sell rain suits on a sunny day cause you to go bust? bailout.

Watch as our government picks winners and losers according to how connected they are to a dear interest group or lobbying firm. Sweeet! Everybody move along. Everything is perfectly fine. The bailouts will help; it is times like these that government can give a "leg up" to the distraught and ailing. And besides, think of all the Green Jobs coming down the pike. We are so lucky.

So, Obama is Outraged, eh?

The whole ruckus concerning AIG bonuses to employees could have been avoided completely if the federal government would have taken some Hayekian knowledge (I know, utterly impossible) and not dumped billions of taxpayer dollars into AIG in the first place. I posted the folly of using taxpayer funds to prop up failing private institutions here, here and here. But whether its the auto companies, investment banks or insurance companies, executives of these corporations are learning the hard way (this is not a bad thing) that receiving funds from the federal government doesn't come without strings attached; politicians will use every possible political angle to make themselves while publically whipping the corporations that they are attempting to "save" in the first place. Simply, the government should never have offered to "save" AIG and AIG should have done the noble deed and filed for bankruptcy. But nooooo..."they're too big too fail." The American public was told that if AIG fails, then a horrid domino effect will take the entire U.S. financial sector down with it--what a bunch of crap. Like the last two stimulus packages, Americans fell for it hook, line and sinker.

BTW, wouldn't it be just grand if we didn't have to be subjected to the bloated rhetoric of Austan Goolsbee.

More Taxpayer Funds Down The Drain

Here we go again. For crying out loud! Does anybody really believe that this is going to work? This is all like a bad dream.

TARP Is Ripe For Fraud

Now don't you all worry your pretty little heads about government bailouts or "stimulus" packages because you should feel that your tax dollars are going to be spent efficiently and wisely. Afterall, if you can't trust the government who will you trust? (Snicker, snicker.)

The U.S. government's rescue of the financial system is vulnerable to fraud that could potentially cost taxpayers tens of billions of dollars, government watchdogs warned lawmakers Tuesday.

Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government's experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud.

He also said fewer than 5% of banks receiving government aid have responded to a request about what they have done with their bailout money.

The comments come as the Obama administration prepares to pour more money into the financial sector. Federal banking regulators begin a series of "stress tests" at the largest U.S. banks this week to determine whether they need greater infusions of government funds to survive a worse economic downturn.

Best post I've read today on Geitner and government intervention in the economy.

Do yourself a favor and read this great post. From Jeff Perren over at Shaving Leviathan:

When that disaster comes, and capitalism is blamed once again, there will be increasing pressure for out and out nationalization of the banks, something to which this Administration is already far too philosophically inclined. (Some reports have them mulling it over already and, of course, to a degree, the implementation of TARP has produced that as a fait accompli.)

...But allowing individuals the freedom to succeed or fail is contrary to the entire mindset in Washington, as it is to much of the country on most points of the political compass. Many, far far too many, delude themselves — despite enormous evidence to the contrary — that government control of such matters is practical. This represents the (let us hope, temporary) triumph of large swaths of the Progressive philosophy, made possible in large part by unhealthy acceptance of Pragmatism over the past 100 years.

"Buy American" is a bad idea

Douglas A. Irwin at the New York Times reminds us that lest we resolve to repeat mistakes from the past, the current provision in the stimulus bill that requires "preference be given to domestic steel producers in building contracts and other spending," smacks of protectionism just when it is least desired:

...History has shown that Buy American provisions can raise the cost and diminish the effect of a spending package. In rebuilding the San Francisco-Oakland Bay Bridge in the 1990s, the California transit authority complied with state rules mandating the use of domestic steel unless it was at least 25 percent more expensive than imported steel. A domestic bid came in at 23 percent above the foreign bid, and so the more expensive American steel had to be used. Because of the large amount of steel used in the project, California taxpayers had to pay a whopping $400 million more for the bridge. While this is a windfall for a lucky steel company, steel production is capital intensive, and the rule makes less money available for other construction projects that can employ many more workers.

American manufacturers have ample capacity to fill the new orders that will come as a result of the fiscal stimulus. In addition, other countries are watching closely to see if the crisis becomes a general excuse for the United States to block imports and favor domestic firms. General Electric and Caterpillar have opposed the Buy American provision because they fear it will hurt their ability to win contracts abroad.

HT: Don Boudreaux at Cafe Hayek

Obama is Bush on Steriods!!

I have always found it quite curious that liberals hated Bush so much yet in many ways he acted (as far as government growth is concerned) like a classic big government liberal---expanding the sheer scope of the federal government and its budget. The size of government grew under his auspices to unprecedented levels. And guess what? The Obama administration is set on making government bigger than even the Bush administration. Watch the video below for Dan Mitchell's explanation:

More public funds for Bank of America

Bank of America has received another $20 billion from taxpayers to shore up their acquisition of Merrill Lynch. This should be an outrage to the average American taxpayer but since the country in under the swoon of the mantra that government must "do something" to get out of the economic doldrums, such massive transfers of taxpayer funds go with nary a protest. Didn't BOA vet the acquisition of Merrill Lynch properly?Or was it that the government implicit guarantee of billions of dollars made them drag their feet when it came to doing their due diligence? When government meddles, unintended consequences are always not far behind.

And the rumba line just gets a little longer

Now commercial real estate developers are asking the government for financial assistance. The line for a taxpayer handout just keeps getting longer, folks. As predicted, a bad precedent was set when the Feds decided to bailout Wall Street.

Thanks for nothing , Mr. President

Bush approves $17.4 billion in aid to automakers.

No bailout for automakers!!

Don J. Boudreaux on the possible bailout of the big three:

So, far from solving this problem, any "bridge loans" from Uncle Sam to the Big Three will only delay the inevitable need to restructure. Bailout money would force taxpayers to foot the bill for Detroit's irresponsible past promises while it protects these firms from having to do the hard work of correcting this real source of their unprofitability. (Of course, bailout money would also protect overpaid and over-pensioned UAW members from having their pay and pensions scaled back to reasonable levels.)

With the symptoms of this serious ailment socialized for however long the bailout funds last -- that is, with nothing done to cure the ailment -- GM, Ford and Chrysler will be no better able to operate profitably after they run through the bailout funds than they're able to do now.

So if they're bailed out now, they'll inevitably be back in Washington in the near future to beg for another bailout.

My Comment: No one would have imagined a world without Pan Am or Woolworth's. I remember those big companies from my youth. After they were gone, the airline and retail industry continued merrily without them. Why do some people believe that if the big three go under it would be the end of the world? Yes, it would hurt to absorb those unemployed auto workers into our ailing economy but a bailout may simply prolong the inevitable. There is no guarantee that if given a bailout loan, the big three would make a triumphant comeback.

Government intervention in our economy will not work

Cato Institute's Dan Mitchell explains the fallacy of "priming the pump." Politicians just love to spend our money.

Bailouts and Bankruptcy

Walter E. Williams on the auto bailouts:

Let's not allow Congress and members of the bailout parade panic us into allowing them to do things, as was done in the 1930s, that would convert a mild economic downturn into a true calamity. Right now the Big Three auto companies, and their unions, are asking Congress for a $25 billion bailout to avoid bankruptcy. Let's think about that a bit.

What happens when a company goes bankrupt? One thing that does not happen is their productive assets go poof and disappear into thin air. In other words, if GM goes bankrupt, the assembly lines, robots, buildings and other tools don't evaporate. What bankruptcy means is the title to those assets change. People who think they can manage those assets better purchase them.

Chapter 11 of the U.S. Bankruptcy Code, where the control of its business operations are subject to the oversight and jurisdiction of the court, gives companies a chance to reorganize. The court can permit complete or partial relief from the company's debts and its labor union contracts.

A large part of the problem is the Big Three's cozy relationship with the United Auto Workers union (UAW). GM has a $73 hourly wage cost including benefits and overtime. Toyota has five major assembly plants in the U.S. Its hourly wage cost plus benefits is $48. It doesn't take rocket science to figure out which company will be at a competitive disadvantage. Then there's the "jobs bank" feature of the UAW contract where workers who are laid off workers get 95 percent of their base pay and all their benefits. Right now there's a two-year limit but in the past workers could stay in the "jobs bank" forever unless they turned down two job offers within 50 miles of their factory. At one time job bank membership exceeded 7,000 "workers." GM, Ford and Chrysler face other problems that range from poor corporate management and marketing, not to mention costly government regulations.

Two vital marketplace signals are the profits that come with success and the losses that come with failure. When these two signals are not allowed to freely function, markets operate less efficiently. To be successful a business must take in enough revenue not only to cover wages, rents and interest but profits as well. In order to accomplish that feat executives must not only satisfy customers but they must do it in a manner that efficiently utilizes all of their resources. If they fail to cover costs, it means that resources are not being used efficiently and/or consumers don't value the good being produced relative to some other alternative. When a firm routinely fails to turn a profit, there are bankruptcy pressures. The firm's resources, workers, building and capital become available to someone else who might put them to better use. When government steps in with a bailout, it enables executives to continue mismanaging resources.

How much congressional involvement do we want with the Big Three auto companies? I'd say none. Congressmen and federal bureaucrats, including those at the Federal Reserve Board, don't know anymore about the automobile business than they know about the banking and financial businesses that they've turned into a mess. Just look at the idiotic focus of congressmen when the three auto company chief executives appeared before them. They questioned whether the executives should have driven to Congress rather than flown in on corporate jets. They focused on executive pay, which is a tiny fraction of costs compared to $73 hourly compensation to 250,000 autoworkers. The belief that Congress poses the major threat to our liberty and well-being is why the founders gave them limited enumerated powers. To our detriment, today's Americans have given them unlimited powers.

HT: Jimmy Cardoza

The 12 Days of Bailouts