I gave a homeless man $10 at a freeway exit yesterday – he looked like he needed it more than me. The greatest panhandlers of our time are not homeless. I seriously question the wisdom of Congress giving yet another $350 Billion away in what has so far been the game of: “So You Wanna Be a Billionaire?” – without much to show for it.
The recipients of the first $350 Billion of the BailOut will not account for what they did with the money; why then is the drumbeat getting louder to give them another $350 Billion? They first need to tell us how they spent, or did not spend but instead hoarded, the first $350 Billion? Bernanke, Paulsen & Co. told us back just a few months ago that the skies would fall, the world, as we know it would end, and that the credit markets had seized up.
Never mind that this same group made Lehman Bros walk the plank and it will take years to unwind the Lehman Bankruptcy and its nearly ¾ of a Trillion dollar debt – that alone just might have caused credit markets to seize up and have a financial stroke. The mass giveaway, without strings or accountability, of some $350 Billion has not thawed the credit markets at all now at year-end.
So, what do our financial gurus still in charge, but not much longer (thankfully), tell us? We have to give another $350 Billion in handouts with no oversight to people who got us into this mess and are very low on the list of those who deserve it – and still no plan to use any of it to help homeowners losing their homes in record numbers.
This makes about as much sense as handing over $100,000 in hundred dollar bills to your teenagers and telling them to spend it as fast as they can, but not to tell you what they bought. Make someone happy this Christmas season; not the taxpayers, for sure.
Bankers and financial institutions, lucky recipients of some of the first $350 Billion – like AIG ($123 Billion) – did not use it for the purposes intended, other than, of course, staying alive. In fact, in the case of AIG, their executives were caught spending $442,000 on a weeklong retreat to a California beach resort, and perhaps another jaunt to go hunting in England – it is rumored that all was gone by October.
Citibank was also kept alive by this form of financial life support. Who is next? GE? Perhaps other businesses will be given a Federal Cash Injection this time – I just heard a long list of retailers who may not make it past the New Year, including some old and venerated names – maybe retail should be next. Then there are cities and states like California, who are about to go off into the Wild Blue Yonder of no money, huge deficits, and no hope – maybe some of this largesse should be directed to states and cities who will have to start shutting down their administrations shortly.
Or, why not leave the other $350 Billion in theory, but not appropriate the money yet just in case things get a whole lot worse in the first couple of quarters of 2009, as some are predicting. That would allow enough time to carefully craft intelligent legislation that makes clear to recipients and the beleaguered taxpayers that these are not handouts like I gave to the homeless guy the other day – the recipients need to show not only that they need it, but also what they will do differently this time with the money to avoid coming back and asking for more. It is time for some much needed fiscal responsibility and accountability.
Also, these should not be handouts – they should be loans, secured by equity in the companies who receive the funds, perhaps by preferred stock, paying health dividends, like Warren Buffett received when he injected cash into GE last Fall. The loans should be set up both to incentivize restructing and reward transparency, new financial planning, and oversight and not to shower executives with off-balance sheet perks, bonuses, and many millions in compensation for running their companies into the ground. Include provisions to waive some interest or even principal as a reward for the recipients’ turning over a new leaf in accounting and finance, showing exactly what they plan to do with the money and treating the US Treasury as a new investor, like any other new investor bringing new money should be treated.
We have set a very poor precedent for handing out money with no strings and then looking foolish because nothing much improved as a result. This is also a great time to get companies to clean up their act, literally and figuratively, to be more environmentally aware and sensitive, and to act more responsibly about really planning their financial futures past the next couple of quarters only to please Wall Street.
Finally, we really do need standards for who will live and who will die. It is incredibly demoralizing to just pour Billions into companies (like the US AutoMakers) who surely will be back in a few months for more, without specific planning, transparency, and criteria. So far, other than vigorous lobbyists, it is totally unclear what those standards might be. The result has been that some very unworthy recipients have lived to work another day for their shareholders, while the shareholders of Bear Stearns, Lehman, and others are left scratching their heads.