Obama Bailout Blues
05 October 2009 10:05 am by Taylor Marsh
–updated–
Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said. The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT on June 6 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares to prop it up at the height of the crisis. The potential loss for taxpayers would be the biggest to crystalise so far from the government’s capital injection plan for banks. … CIT declined to comment. In an effort to prevent bankruptcy, it is working on a debt exchange offer that would virtually wipe out equity holders. In the event of bankruptcy, Goldman would reap more than $1bn because it also holds credit insurance that would be paid off. … – Financial Times
There are those two words again: Goldman Sachs. The relentless coverage by the Huffington Post of the economic banditry currently underway on Obama’s watch, with Arianna Huffington taking the lead from the left, gives this story an even better headline: GOLDMAN PARACHUTE. Indeed.
“Too big to fail” still stands as well.
… [...] So far, none of the worst fears of those who believed that the stimulus was too small or that nationalization was the only option or that taking over car companies would destroy the fabric of capitalism have materialized. Indeed, several private forecasters have credited the stimulus with blunting the impact of the recession—it probably added around three points to the G.D.P. last quarter—and the banking system has dramatically stabilized since the stress tests were completed. But competence has its limits as a source of inspiration. Paul Krugman said, “The stimulus helped, but the question is, ‘Is that enough?’ ” With unemployment at around ten per cent and still on an upward trajectory, the Administration is left arguing not that jobs are being created but that without Obama’s policies things would be worse. It’s not a very pithy slogan. And, undoubtedly, the huge government interventions laid the groundwork for the political backlash against Obama that was unleashed this past August and which has jeopardized his larger agenda on health care, global warming, and financial regulation. Obama and his team have pulled the economy back from the abyss, but they will get credit only when it has been rebuilt.
To add, Dean Baker rebuts.
Finally, we are told in conclusion that: “So far, none of the worst fears of those who believed that the stimulus was too small or that nationalization was the only option or that taking over car companies would destroy the fabric of capitalism have materialized.”
Sorry, but this is wrong, big time. The worst fears of some of us who said that the stimulus was too small were that we would be sitting around with 10 percent unemployment for a long period of time and that stimulus would be discredited. That pretty well describes the world we live in, even that may not be the case in New Yorker land.
CIT graphic via Financial Times
