I'm so sick of the government bailing out failing financial institutions. I'm gonna go all geopolitical on you fools for a minute, so just bare with me
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My economics teacher would probably agree with you in one regard.
However, here's the problem with NOT bailing some companies out: in the short-term, it is really, really bad for the economy. In an industry with few large companies, losing a major one is setting the others up to struggle. It is easy to say that the other companies will step up and do things right, but that takes time, and meanwhile, there are thousands - if not millions - of jobs lost, money going to whomever can pick up the slack an who is to say that that whomever can even handle the sudden influx of business. Think of how busy you are at work, and then multiple by ten! It's hard for a company to hire more people permanently when they don't know how long this influx will last, be it days or years, and it's hard for them to absorb the problems of other people - and that's what they would have to do. Any business with an account has a hard time disappearing because that account needs to go SOMEWHERE, so someone has to buy it, and someone has to refile the data, etc., and it's a huge hassle for the consumer and the businesses involved.
I agree with you that bailing companies out is not the way to go - definitely not! But consider that in a day in which our country is bought and sold overseas, our government is trying to sustain what little domestic business we can hold on to, for better or for worse. Losing these businesses to foreign markets could be worse than the bailout.
Yes, short term, bailing out the companies will save thousands of jobs, and will delay a major crash on wall street. Two segments hit hardest by this, people that work for the mortgage companies responsable for this collossal failure, and the richest 2% of the country, who invested heavily in bad paper.
Long term it will cause the economic downturn to last an even longer time, since it is preventing the housing market from bottoming out. It is also 700 billion dollars that we will never see a return investment on, all the loans being bought out by the government is toxic paper, loans that should never have been issued in the first place. Loans that cannot be sold, and will be liquidated for pennies on the dollar.
Its always better to rip the band aid off in one swift motion, it hurts more to start, but the pain goes away much faster.
However, here's the problem with NOT bailing some companies out: in the short-term, it is really, really bad for the economy. In an industry with few large companies, losing a major one is setting the others up to struggle. It is easy to say that the other companies will step up and do things right, but that takes time, and meanwhile, there are thousands - if not millions - of jobs lost, money going to whomever can pick up the slack an who is to say that that whomever can even handle the sudden influx of business. Think of how busy you are at work, and then multiple by ten! It's hard for a company to hire more people permanently when they don't know how long this influx will last, be it days or years, and it's hard for them to absorb the problems of other people - and that's what they would have to do. Any business with an account has a hard time disappearing because that account needs to go SOMEWHERE, so someone has to buy it, and someone has to refile the data, etc., and it's a huge hassle for the consumer and the businesses involved.
I agree with you that bailing companies out is not the way to go - definitely not! But consider that in a day in which our country is bought and sold overseas, our government is trying to sustain what little domestic business we can hold on to, for better or for worse. Losing these businesses to foreign markets could be worse than the bailout.
Just playing devil's advocate or something. :)
Carry on.
<3
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Yes, short term, bailing out the companies will save thousands of jobs, and will delay a major crash on wall street. Two segments hit hardest by this, people that work for the mortgage companies responsable for this collossal failure, and the richest 2% of the country, who invested heavily in bad paper.
Long term it will cause the economic downturn to last an even longer time, since it is preventing the housing market from bottoming out. It is also 700 billion dollars that we will never see a return investment on, all the loans being bought out by the government is toxic paper, loans that should never have been issued in the first place. Loans that cannot be sold, and will be liquidated for pennies on the dollar.
Its always better to rip the band aid off in one swift motion, it hurts more to start, but the pain goes away much faster.
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