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Bush, Romney, and Obama all show some love to the bank bailouts, though -- who says we can't all get along

President George W. Bush (R) created strong divisions within the Republican party when he backed a $700B USD bailout of the struggling automotive and financial sectors.  Both he and current President Barack Obama (D) see eye to eye on this issue, though -- they felt that bailouts were the only thing keeping the nation from economic collapse.  

Public surveys during the height of the recession indicated that nearly 60 percent of Americans disapproved of the bailout.

I. Bush Defends Bailouts, Says he Did the Right Thing

Criticism from his party and the public has not swayed former President Bush's conviction that he made the right choice.  In a Q&A at an auto dealer convention in Las Vegas, President Bush is quoted as saying, "I'd do it again.  I didn't want there to be 21 percent unemployment."

As to the free market proponents that say that the companies should have been allowed to go through the traditional process of bankruptcy and liquidation, Mr. Bush disagrees.  He says that he would traditionally support that -- but that the cumulative impact of the recession required a more intimate approach.  He comments, "If you make a bad decision, you ought to pay.  [But] sometimes circumstances get in the way of philosophy."

He says he "had to" break with his rigid conservative roots and craft the bailout, in order to "safeguard American workers and families."  He takes credit for crafting the financial tools that President Obama would later use to slow the recession and set the nation back on more stable financial ground.  He comments, "[I expected to] kind of ride out to the sunset [in my last year of presidency].  [But] I didn't want to saddle my successor with an additional economic crisis."

He said his Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke approached him, stating, "Are you willing to gamble [with the chance of depression]."

He recalls replying, "I don't want there to be a depression, no matter what the probability may be…"

Bush looking down
President Bush says he made a tough choice, but the right one. [Image Source: Getty Images]

The bailout will go down in American history as a controversial invasion of the private sector, which the American government has traditionally sought to play a limited regulatory role in.  But some economists and historians also credit the program for possibly preventing a depression [source], although such "what if" scenarios are indelibly open to debate.

II. The Results

For all the resentment, President Bush believes that inaction would have left his reputation far more tarnished.  He states, "I didn't want to gamble. I didn't want history to look back and say, 'Bush could have done something but chose not to do it.'"

Presidents Bush and Obama used the Troubled Asset Relief Program (TARP) to ease financial firms and automakers through a gentler process [1][2], which allowed them to consolidate their profitable segments and stay in business.  Laggard units were dumped off to the highest bidder in an attempt to pay the bailout loans and grants.

 Obama and Bush
Presidents Obama and Bush cumulatively archictected the bailout. [Image Source: AP]

The government even took a stake in many of the "bailed out" financial firms, as well as General Motors Comp. (GM) and Chrysler.  The government has recouped some of the money it loaned, but it will likely never be repayed some of the billions it poured into both sectors.  In fact, it's already forgiven some of the bailout recipients of substantial chunks of taxpayer debt, and given many of these struggling firms tax holidays, which will allow them to enjoy tax-free profits for years to come.

On the flip side of the coin, while the government isn't collecting any corporate taxes from these fortunate corporations, it has avoided a surge in unemployment.  GM and Chrysler today profitable [1][2] and hiring -- as are some of the rescued financial firms.

GM assembly line
Liquidation would have left tens of thousands of GM and Chrysler assembly line workers unemployed. [Image Source: Scott Olson/Getty Images]

Other nations also participated in the bailout of the automakers [1][2].

III. Republican Hopeful Romney Blasts, Bush, Bailouts

One person who is not a fan of President Bush or his bailouts is leading Republican 2012 presidentical candidate Mitt Romney.  He commented in September, "[Automakers] needed to move into a managed bankruptcy process rather than getting money up front by President Bush or President Obama.  They wasted a lot of money."

Mr. Romney stirred up controversy during the waning days of the Bush presidency, with an editorial in The New York Times,  "Let Detroit Go Bankrupt", which blasted the Bush bailouts. 

Let Detroit Go Bankrupt

In the piece he wrote:
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

Intriguingly, Mr. Romney has not been overly critical of the banking sector, which received far more money from TARP than the automotive sector.  One possible reason why?  According to Open Secrets, "bailout banks" such as JP Morgan Chase & Comp. (JPM), Bank of America Corp. (BAC), and Goldman Sachs Group, Inc. (GS) have been extremely generous Mr. Romney, donating millions to his presidential bid.

On the financial sector he comments, "I believe that it was necessary to prevent a cascade of bank collapses."

Mitt Romney
Mitt Romney has attacked the bailout to try to score points with conservative voters.
[Image Source: Emmanuel Dunand/Getty Images]

Judging as the average corporation or special interest group receives $222 USD in tax breaks per $1 USD spent [source], the $10M USD he received from the financial sector would put him on the hook for roughly $2.22B USD in "tax holidays", and similar taxpayer funded goodies, should he be elected.

Source: Detroit News

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RE: Imagine
By EricMartello on 2/8/2012 3:39:41 AM , Rating: 2
Was that an attempt at a logical economic argument, or just expressing your preference for economic apocalypse if it manages to stick it to those you dislike for their success?

Success? Wow a little dense, are we? No, it's not success. It's the result of being able to exploit the system since they are the ones controlling the system. Success is earned - their wealth is based on exploitation, fraud and thievery.

Because, that's what would've happened. Most of the rich and powerful would've had their power stripped, a few (probably the government) would've become further entrenched, and everyone else from the bottom of the economic ladder up through the upper middle class would've had any and all savings annihilated. At least, if you'd had your way.

Considering that the "rich and powerful" who stood to lose were also the ones pulling the strings within the government, I'd be willing to wager that the bloated facist regime we have now would implode. How many congressmen are also raking in over a million a year? You think they get that money from "hard, dedicated public service" right? They're earning that, they're privy to information about the companies they regulate and are able to use that to their own benefit.

That brings up another point: it's almost useless trying to create an equal society. In history, I'm not aware of it ever being the case. Some lead, most follow. There's always someone "more equal" then the others. In China, 99% were equal, but Mao, he was more equal. Stalin, same thing. Chavez. Castro.

Wait..who said anything about equality? I merely said the distribution of wealth would be more spread out...i.e. thrown back to a time when currency actually had value based on goods/services and not the volume of paper money being printed or the Fed's interest rate for banks.

Nice job citing other extremist regimes but failing to grasp the fact that the USA is an extremist capitalist country. Allowing too few to wield absolute power guarantees corruption...spreading the power around and preventing any one entity from consolidating it maintains a kind of balance.

All any plan to remove the powerful simply replace them with someone else. Typically it's a change for the worse. At least in America, the majority of millionaires are in fact self-made, so that should be something to be proud of, even though they're objects of hate for most.

Pretty sure that the leaders of the Mexican cartels would qualify as "self-made" millionaires and I'm sure they are proud of it.

If people expect a society to work effectively then it needs to be classless. I would never agree to welfare handouts, but I do believe that all people within a society should have more-less equal opportunities to find success as opposed to being under the collective thumb of the "ruling class".

RE: Imagine
By Reclaimer77 on 2/8/12, Rating: -1
RE: Imagine
By EricMartello on 2/11/2012 7:44:08 AM , Rating: 1
This is nothing but thinly veiled class warfare. The US Treasury created the problem that you're now blaming on a select few rich people. And it's the US Treasury that's going to always prevent any significant changes to the system.

No, it's the federal reserve bank - a non-government entity controlled by the government - that maintains the status quo, keeping rich people rich, middle class middle and poor people on the welfare treadmill though the manipulation of the dollar and the nations financial systems.

Your opinions are disgusting and divisive. And not at all accurate of the situation.

False, because I've only stated facts.

More proof that YOU'RE the extremist. We haven't been "extremist capitalist" in over half a century. No economist in his right mind would call us extremely capitalist anymore. We're as mixed as can be. Our country is capitalist with corporatist and socialist ingredients mixed in.

Do you even know what it means to be an extremist capitalist nation? It means that any individual can potentially horde a large share of resources without incurring any major restriction and without any compelling reason to reinvest into our economy...whereas an extremist communist country seeks to distribute the "governmental power" evenly across the entire 'working class'. Neither work because extremism does not allow much room for compromise and adaptation...and our system is NOT working for a lot of people. A balanced system somewhere between capitalism and communism would yield a much more satisfying life for many people.

Let me break this down for you into a real-world example. Let's say you have $100K to invest and $100,000K. It is very easy to devise a sustainable investment income from the larger investment without taking a large financial risk. At the same risk level, the $100K investment will not yield the same type of return.

What effect does this have? It enables individuals to cross a threshold where once they reach that point they can stop working and earn an income almost exclusively from capital gains on their investments...and if you have a rudimentary understanding of how investment works, for someone to WIN $1,000,000 someone has to LOSE an equal amount...but that amount that gets lost tends not to be recirculated since it is moved off-shore to avoid taxation. This results in a concentration of wealth distributed over a very small number of individuals in relation to the entire country's population, where the wealth is not used to benefit the country and only widens the gap between classes.

In an "extremely capitalist" country we wouldn't be having this discussion. Because bailouts and handouts wouldn't have happened in the first place.

The bailouts happened to maintain the system. If the current financial system fell apart it would largely be beneficial for Americans, especially the decentralization part and shifting away from a fiat currency. Having a welfare program to make sure poor people remain content to be poor - and in no way suggests that the USA is not an extremist capitalist country.

RE: Imagine
By Ringold on 2/8/2012 8:08:06 PM , Rating: 2
No, it's not success. It's the result of being able to exploit the system since they are the ones controlling the system.

Undisputed fact, noted in many sources: The vast majority of American millionaires came from modest or poor backgrounds. Only 9% of households with $10m or more in assets acquired them by way of inheritance. Further, many millionaires are self-employed, such as doctors. So unless you define coming from a modest home, working ones ass off in college or in the workforce, and building ones way to millions is manipulation, fraud or thievery, then you are wrong. It's just plain success. Facts are facts, feel free to google.

I'd be willing to wager that the bloated facist regime we have now would implode.

Congress controls the army. Congress controls the Treasury. Congress controls the Federal Reserve. So, they have all the money, the ability to print more money, and the men with all the guns. My money is on them.

Wait..who said anything about equality? I merely said the distribution of wealth would be more spread out...i.e. thrown back to a time when currency actually had value based on goods/services and not the volume of paper money being printed or the Fed's interest rate for banks.

Equality and currency values are two totally different things.

Allowing too few to wield absolute power guarantees corruption...spreading the power around and preventing any one entity from consolidating it maintains a kind of balance.

Now you sound like a small-government, constitution-loving Republican!

If people expect a society to work effectively then it needs to be classless.

I believe it is, to a degree, though exceptions have been created in the last couple decades. A cultural rift has opened again (not the first time in our history) between left and right, for one. Second, there's the middle and high income groups that work for a living, but now also this failed culture of poverty that keeps people stuck in ghettos. It's largely a black problem, and Herman Cain tries to talk about it, but if a white person talks about it then all hell breaks lose and too few blacks have moved past the 60s to be able to talk about it openly, so the problem festers.

"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference

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