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