Holidays are just around the corner, so tis' the season... to be in trouble, at least if you're a big corporate company who appears "too big to fail." So what is too big or too small? And more importantly, how does this affect us (taxpayers)?
Well according to the government's bailout plan you must be a Tier 1 financial company in order for compensation for your misguided business actions. According to the US Department of Treasury's release on July 22, 2009 a Tier 1 financial holding company is " financial firms that are found to pose a threat to our economy's financial stability based on their size, leverage, and interconnectedness to the financial system."
Does this help? Probably not. The definition is still not very clean cut as to what makes a company valuable enough to "pose a threat." However, I can tell you one thing that is very clear: they are being bailed out with our tax dollars, 700 billion of our tax dollars to be even more precise.
So, now that we have the what and who covered, on to the why. A poll done by Los Angeles Times/Bloomberg posted on September 23, 2008 that 55% of American taxpayers were opposed to the Wall Street bailout. So why are we rescuing unsuccessful business plans? Why are we shouldering the burden for big businesses failures? Why are the majority of Americans suffering because of a minority of people's mistakes?
Because the government said so.
That used to work when my mother said that to me; however, I then developed a mind of my own. I suggest we let big business take on their own responsibilities and develop some personal accountability, and if they fail-out, so be it. But we can only hope that in the end, things end well, because after all tis' the season to be jolly.
Interested? Learn more:
US News- Rick Newman
USA Today- Peter Shweizer
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The thought of bailing out companies that fail with taxpayer money is a scary one. We've already seen the banks receive large portions of the first $700+ billion the government has allocated to struggling companies, and the auto industry was/is the next. Like Krista mentions in the post, Tier 1 companies are the most likely recipients of government bailout money, but what's to keep the government from taking a Tier 2 company and moving it higher to qualify?
ReplyDeleteBased on the current definition, you could argue airlines, cell phone companies, pharmaceutical companies, and dozens more could potentially qualify for bailout money, which sets up a slippery slope.
These companies should have been more aware of their mistakes before it reached the current point. Banks argued they just needed the funds in the short-term to rebound in the long-term, but there hasn't been evidence of that yet.
and then a bank that was bailed out by the government is now trying to foreclose on our home because they say we are 6 mo. behind on the mortgage. I have records that show we have missed only two-one for this month and Aug. So now what happens when the bank who was bailed out tries to get its money back by taking your home.
ReplyDeleteAlthough it may seem morally right, letting big business "take accountability" and then possibly "fail out" is by no means practical and by every extent of the word, detrimental. Our country is far from pure capitalism especially nowadays. I do not believe that the bail-outs were necessarily fair, because let’s face it, the government is playing favorites based on size and power as to who gets these bailouts, and John Doe American is suffering with his tax dollars. This fact cannot be negated but sometimes you have to but "fairness" aside and think about practicality. AIG and Bank of America the two companies at the heart of these bailouts are major catalysts to our economies, employing the masses and handling the funds for the millions. Allowing such corporations would not only put people put of work, but damage the market even further. In times like this we cannot just allow some things to happen despite the reasons. Barrack Obama couldn't have put it better, "If your neigbors house is on fire, whether they were smoking dope in the bedroom or it wasn’t there fault, you're still going to go put that fire out before it spreads to your house."
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