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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 Reclaimer77 on 2/8/2012 9:58:08 AM , Rating: 0
The US Treasury isn't the Government?

Honestly some of you are coming off like REAL radical left extremists. Banking cartels don't control currency or print it out. The US Treasury and Federal Reserve does! Government agencies.


RE: Imagine
By HrilL on 2/8/2012 12:50:38 PM , Rating: 5
Really Reclaimer77? I used to have a little respect for what you would say but after what you just said... Lets just say you throw the baby out with the bath water.

The Federal Seserve is a group of 12 PRIVATE Banks that has a board of 7 memebers that are appointed by the president. There is not audit of their actions and there is no oversite to what they do. They are not part of the government at all. They do however control our money supply. http://en.wikipedia.org/wiki/Federal_Reserve_Act

Here is a graphic of what happens to a currency when corrupt private officals profit off of it. And why we need to go back to sound money.
http://investletters.com/blog/wp-content/uploads/2...


RE: Imagine
By geddarkstorm on 2/8/2012 2:17:35 PM , Rating: 4
It is a little known fact, ironically. It's called the "Federal Reserve" but it is a private corporation as you point out, and has nothing to do with our actual government directly. Same with the IRS. All attempts to audit the Federal Reserve by our government have failed. Not a happy proposition for the force controlling our economic currency. Same thing with the bailout funds, no know but the Reserve knows where the majority of it all went, though we are slowly discovering more about TARP.


RE: Imagine
By Reclaimer77 on 2/8/12, Rating: -1
RE: Imagine
By geddarkstorm on 2/8/2012 3:33:19 PM , Rating: 2
Indeed, it is madness in my eyes that Congress forced the federal reserve act on the country. And what has that earned us? At the time it probably seemed like an interesting idea. But meddling government with the private and forming a pseudo organization that exists neither here nor there, and yet dictates our economy to us... that should be an ultimate sin in the eyes of both parties--as it hampers the function of both sides. The banking industry should deal with currency on its own, as competition will balance it out best for the economy, in my view. If the government wanted its own bank, it should have to compete against all other banks the same, not dictate to them the rules. Artificial, insulated standards pretty much never lead anywhere good; especially with an organization that has such absolute power like the Federal Reserve.

And you're completely right that the notion of the government being blameless and the "rich" all at fault is a nasty double standard. Though, I don't see the above poster arguing that.


RE: Imagine
By Reclaimer77 on 2/8/2012 4:13:53 PM , Rating: 2
The Reserve Act is proof that such a wide sweeping mandate, no matter how well intentioned, will always have major failings.

Also proof of how easy it is for elected officials to sweep aside the Constitution whenever they see fit.


RE: Imagine
By geddarkstorm on 2/8/2012 3:41:58 PM , Rating: 3
I guess it's easiest to say the Federal Reserve is a private entity which can use the full power of the government against all other private entities, at its choosing. The Federal Reserve can dictate the terms of the playing field to everyone else -through- the government; and it doesn't even have to answer for what it does. That's the way it seems to me from all the reading and watching of the going ons I've done. Couldn't ask for a more potent monopoly, or corruption!

Government shouldn't have this power, and a corporation working through the government directly, definitely should not.


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