The past effects of the government bailout that have been discussed were primarily with a narrow focus. The repercussion that will be discussed now deals with the government’s initial authority on actually being able to perform this action. I believe that this aspect must be examined because too often in our day to day lives regular citizens do not pay close enough attention to the actions of our government. We become passive and disinterested in their dealings. I believe that this cannot be done in the current situation of our country. Once you actually start to examine and see what our elected officials are doing and the reasoning behind it, you might become afraid. I am not going to go as far as some individuals in the media do by calling the current administration a socialist government. However, I do believe that each one of us must ask ourselves, how far do we let them go and how much power do we give the government before things could get out of hand?
One must determine at what point does capitalism end and socialism begin. I believe that capitalism will be brought down by individuals who do not allow the free markets to work in a truly free and competitive fashion. If the government continues to interfere in the private sector by bailing out these failing corporations then that will signal the end of capitalism as we know it, in my opinion. This debate of federal government power goes back to the heart of political ideologies, which is not my concern here. What I am concerned with is that our administration does not seem to be understanding that based on their bailout history recently they are not helping to improve our markets. Yet, they continue to take more and more power and look to delve deeper and deeper into the private market. That is the scary part.
I understand that the government has had a history of bailing companies out. By taking a look at this history hopefully it will allow us to get a better perspective on where we currently stand. According to propublica.org, the United States government has bailed out corporations 15 times since 1970. This number does not seem so bad and I’m sure you’re thinking what is the big deal with them doing it right now then? Of those 15 times, 7 have occurred since 2008! This means that the United States government has bailed out privately held companies as many times in the past 2 years as they have in the past 38 years basically. Recently these bailouts have ranged from Bear Sterns to the auto industry to the Bank TARP program. This is where my concern comes in. The past 2 years the government has overstepped their boundary line immensely and it must stop.
With the kind of power to bail out any company in the country regardless of what sector they are in means that the government also has the power to destroy any country if they so choose. It is my belief that the government’s spending and overall power must be scaled back and one of the ways that this can be done is with no mare bailouts. Washington should do its job and let the market do its job.
Source:
http://www.propublica.org/special/government-bailouts#bofa
Tuesday, March 2, 2010
Monday, March 1, 2010
Social Problems With a Bailout
The government bailing out large corporations that are struggling can have many effects on our country. We have already seen the fundamental business question that it asks of us and how it goes against the mainstream business concepts, now the social problems that it creates will be addressed. Beneath the idea of the bailout based on the “too big to fail” concept is the real reason why these corporations receive the tax payers money which is, as previously hinted at, all based on politics. This creates a major issue within our society. It is awful to think that our elected representatives of Congress and even the President are helping these CEOs revive their companies through tax payer dollars when their business model has clearly not worked in the past. Wall Street and Washington DC need to be separate entities working in their own interests. However, when the bailout comes around, DC’s interests morph into those of Wall Street’s. Wall Street’s interests have clearly been defined as making as much money for themselves through profits or ridiculous bonuses even after they have received bailout money. When this occurs the only person that gets left out is Main Street, the average family trying to make it by pay check to pay check. The people who are supposed to be out there fighting for the average Joe are instead making sure that Wall Street has plenty of billions so that the CEO can even have a ridiculously large bonus.
I see an extremely flawed situation here. The rich are getting richer at the expense of the average citizen. Known blogger at fastcompany.com, Jay Draiman, agrees with this thought. He says “It seems the little guys are the ones that always pay the price for corporate financial abuse and miss-management.” Going back to the average family, we have two working parents with three kids in school and the little amount that they might be able to save week to week they decide to invest in the stock market. Now however, their investment has no opportunity to grow, in fact it has probably decreased because their elected official in Congress is keeping the same businessmen and concepts in Wall Street where clearly their ideas are not working.
Not only do I feel bad for the Main Street citizens, but I am also extremely angry at the Wall Street executives. Based on their actions they are increasing the gap between the wealthy and the middle income by benefiting from their failed actions. A perfect example of this is based on the bailout of AIG and the subsequent bonuses that were handed out. The bonuses were grandfathered in from before the bailout but if I were one of those business men I would not have taken that money knowing that I did not deserve it. The scarier part of the situation here is that the reasoning behind these business men’s actions which is based on a moral hazard. They are fully aware that they can continue to act in the same foolish and risky way and know that if they do get their company in trouble again then the government will always bail them out since they are “too big to fail.”
Once again, the negative consequences of a bailout by the government are clearly seen. Not only are the bailouts affecting America’s way of business as previously discussed, but now they are making negative social impacts on our country. The worst part is that the struggling average American family is struggling because of it.
http://www.fastcompany.com/blog/jay-draiman/renewableenergy2/should-us-government-bail-out-american-corporations
I see an extremely flawed situation here. The rich are getting richer at the expense of the average citizen. Known blogger at fastcompany.com, Jay Draiman, agrees with this thought. He says “It seems the little guys are the ones that always pay the price for corporate financial abuse and miss-management.” Going back to the average family, we have two working parents with three kids in school and the little amount that they might be able to save week to week they decide to invest in the stock market. Now however, their investment has no opportunity to grow, in fact it has probably decreased because their elected official in Congress is keeping the same businessmen and concepts in Wall Street where clearly their ideas are not working.
Not only do I feel bad for the Main Street citizens, but I am also extremely angry at the Wall Street executives. Based on their actions they are increasing the gap between the wealthy and the middle income by benefiting from their failed actions. A perfect example of this is based on the bailout of AIG and the subsequent bonuses that were handed out. The bonuses were grandfathered in from before the bailout but if I were one of those business men I would not have taken that money knowing that I did not deserve it. The scarier part of the situation here is that the reasoning behind these business men’s actions which is based on a moral hazard. They are fully aware that they can continue to act in the same foolish and risky way and know that if they do get their company in trouble again then the government will always bail them out since they are “too big to fail.”
Once again, the negative consequences of a bailout by the government are clearly seen. Not only are the bailouts affecting America’s way of business as previously discussed, but now they are making negative social impacts on our country. The worst part is that the struggling average American family is struggling because of it.
http://www.fastcompany.com/blog/jay-draiman/renewableenergy2/should-us-government-bail-out-american-corporations
Fundamental Business Question
The concept of the United States government bailing out large companies and institutions brings up a fundamental business question that must be answered in today's society. This may be one of the most important issues that young business students pay attention to, since the government's involvement in our future careers will affect us for the rest of our lives. "Bailing out" can be defined as the government loaning struggling companies tax payer money in order to allow the companies to get back on their feet and recover from their financial hardships.
The large issue that is at hand, the one that we all must ask ourselves, is why should these businesses continue to operate when they were bound to go bankrupt and fail? The common response to this has been that these companies are "too big to fail." It is the belief of politicians, like President Obama, that these institutions have too many investments in them and play too large of a role in our economic markets, that if they did fail then our entire economy would dramatically decline. A subset of this idea is that these companies employ so many individuals that if they did fail, there would be too many people who would become unemployed as a result. So the government's response to this has been to lend these companies, like AIG, billions and billions of dollars. The administration believes that it is their place to step into the private sector. Their justification for these billions sent to the companies is that this is the better of the two options, however we must look at the ramifications that this decision has on the rest of the business world.
I believe that by the government bailing out failing businesses they are going against the mainstream American values that have made the United States the leading nation in the world. Throughout our history we have continually improved in all aspects of business. When one business could not succeed another would come along and do the job better. However, now this cannot occur due to the bailouts. We are no longer allowing the continual growth that occurs when businesses fail and successful businesses prosper. Instead, now we are stuck with the same businessmen and business concepts that got our economy in trouble in the first place. Peter Boockvar, equity strategist at the trading firm Miller Tabak and Co. also supports this viewpoint; he says that “Artificially trying to prop up dead entities is only prolonging the inevitable.” And the big question that should be drawn from this is why should these business men continue to receive multiple chances to get their business model right? That is not how the rest of the economy works. More importantly, this concept is not fair to these possible businesses that could be moving in and implementing their ideas.
Moreover, who is to say that a company is "too big to fail?" Enron was not bailed out and they were a huge corporation. The difference here was that they were entangled in corruption so the government did not want to help save them, regardless of how large they were and how big of a market share they held, even if this resulted in the loss of a Big 5 accounting firm. Based on this, we can see that in the end it is politics that determines which companies are saved and bailed out and which are left to the natural forces of the market.
Before the government acts again in bailing out another struggling consequence, they must first consider if they are actually helping and if maybe they should just let the free market work the way it is supposed to. What can be seen now though is that these businesses should not be bailed out even if in the eyes of some politicians they are “too big to fail.”
http://abcnews.go.com/Business/MarketTalk/story?id=5824413&page=1
The large issue that is at hand, the one that we all must ask ourselves, is why should these businesses continue to operate when they were bound to go bankrupt and fail? The common response to this has been that these companies are "too big to fail." It is the belief of politicians, like President Obama, that these institutions have too many investments in them and play too large of a role in our economic markets, that if they did fail then our entire economy would dramatically decline. A subset of this idea is that these companies employ so many individuals that if they did fail, there would be too many people who would become unemployed as a result. So the government's response to this has been to lend these companies, like AIG, billions and billions of dollars. The administration believes that it is their place to step into the private sector. Their justification for these billions sent to the companies is that this is the better of the two options, however we must look at the ramifications that this decision has on the rest of the business world.
I believe that by the government bailing out failing businesses they are going against the mainstream American values that have made the United States the leading nation in the world. Throughout our history we have continually improved in all aspects of business. When one business could not succeed another would come along and do the job better. However, now this cannot occur due to the bailouts. We are no longer allowing the continual growth that occurs when businesses fail and successful businesses prosper. Instead, now we are stuck with the same businessmen and business concepts that got our economy in trouble in the first place. Peter Boockvar, equity strategist at the trading firm Miller Tabak and Co. also supports this viewpoint; he says that “Artificially trying to prop up dead entities is only prolonging the inevitable.” And the big question that should be drawn from this is why should these business men continue to receive multiple chances to get their business model right? That is not how the rest of the economy works. More importantly, this concept is not fair to these possible businesses that could be moving in and implementing their ideas.
Moreover, who is to say that a company is "too big to fail?" Enron was not bailed out and they were a huge corporation. The difference here was that they were entangled in corruption so the government did not want to help save them, regardless of how large they were and how big of a market share they held, even if this resulted in the loss of a Big 5 accounting firm. Based on this, we can see that in the end it is politics that determines which companies are saved and bailed out and which are left to the natural forces of the market.
Before the government acts again in bailing out another struggling consequence, they must first consider if they are actually helping and if maybe they should just let the free market work the way it is supposed to. What can be seen now though is that these businesses should not be bailed out even if in the eyes of some politicians they are “too big to fail.”
http://abcnews.go.com/Business/MarketTalk/story?id=5824413&page=1
Subscribe to:
Posts (Atom)