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article imageOp-Ed: The Ace in the Hole - Bush, the Bailout, and Big Business

By G. Robert M. Miller     Sep 27, 2008 in Politics
With Wall Street on the brink of collapse and Bush asking congress to further debase the American dollar in order to bailout corporate America, what I want to know is a) who does this bailout benefit and b) will it solve the problem?
So it turns out there was one last trick up the Bush administrations sleeve (let’s hope it was their last); and boy - how genius was this one?
Allow Wall Street to stagnate, let stock prices plummet – then, upon the brink of collapse, bailout publicly traded corporations at the expense of each and every American (and world) citizen.
Not only do the companies themselves survive despite ineptitude (and probably deceit), but the average Wall Street investor now gets to walk onto the trading floor Monday morning with full ‘confidence’ that everything is honky dory (so long as a package is agreed upon by then).
Speculation that the bailout plan is going to save the markets will surely cause devaluating stocks to rebound, thus giving those with greenback laden pockets the perfect opportunity to buy low and sell high (and instantly begin down the same path).
But does the bailout package solve the problem, or just solve the problem for corporations and those heavily invested in the stock market? Well, host of the politically charged HBO show Real Time, Bill Maher offered an interesting question to guest and author of The Shock Doctrine, Naomi Klein about the Wall Street bailout package on the September 19, 2008 edition of the show:
“‘(The Bush administration) likes it when there is a disaster – they let things go to shit so that there friends can come in and make money off it. Is what’s going on this week (the Wall Street bailout) an example of that?’
‘Absolutely, and the disaster is far from over, they’ve actually just relocated the disaster – the disaster was on Wall Street, and they have moved the disaster to main street. By accepting those debts – and you know, you said they didn’t have to bomb – but the bomb has yet to detonate. You know, the bomb is the debt that has now been transferred to the taxpayers, so it detonates when, if John McCain becomes president in the midst of an economic crisis and says “look, we’re in trouble, we’ve got a disaster on our hands – we need to privatize social security, we can’t afford health care, we can’t afford food stamps, we need more deregulation, more privatization” – you know the thesis of The Shock Doctrine is that you need a disaster to put to rationalizing pushing through these very unpopular policies. So the real disaster has yet to come. The real disaster is the debt that is going to explode on the American taxpayer.’”
What a genius plan. The poor bailout the rich, the rich recover completely (save for the fact that their money too is worth less due to the issuance of $700 billion US dollars), and the poor see no net benefit, other than the fact that the terrible direction quality of life in America has been going is slowed (though no stopped, and certainly not reversed).
Whether or not the core intent of this package was to protect and support the wealthiest citizens in the free world is disputable, but that protection and support is being provided to those individuals in this plan is indisputable.
As it appears, it does look like something needs to be done to avoid a complete collapse of American banking (and economic) system. But the bailout package does not address the corporate malfeasance that brought us to this point. The malfeasance that has led us here has to do with the fundamental lifeblood of the stock market system; speculation. Speculation, perception, confidence – whatever the term – promotes deceit.
Any company that is traded publicly, first and foremost, serves their stakeholders, and specifically their shareholders (as they are the largest stakeholders). The primary goal that shareholders want their company to address is the price of their stock. If the value of the stock goes up, they’re doing a good job, if not, well, management can be replaced. And managers know this all too well.
In fact, two managers that new that their livelihood was directly related to the price of their companies stock were Jeffery Skilling and Ken Lay. As a result of that knowledge, they did everything in their power to raise the value of their stock. Enron, at it’s peak, was believed to be worth $70 billion US dollars. In reality it was worth $30 billion. $30 billion is still a lot of cake, but instead of standing in front of their shareholders and honestly telling them that their stock is worth less than as advertised, they continued to fabricate confidence in their company until it completely collapsed… Too bad they couldn’t have hung on to 2008 – they'd probably be drooling at the idea of this bailout package.
It shouldn’t come as a complete surprise to us that this sort of thing is happening though. We should just be thankful that Ken Lay never got into the Bush administration (as planned). Mind you, Henry Paulson, one of the lead minds behind this bailout plan, is the same Henry Paulson that left Goldman Sachs two years ago, walking away with half a billion dollars, and leaving behind a firm crippled and firmly headed down the road to collapse.
Yes, the same man who headed a company just two years ago that is now failing is the same guy who is supposed to come up with a plan to save the American economy…
The point though, through all of this, is that the Bush administration has brought America to the brink of another disaster, and again, the richest people in America will profit from it.
Of course, this article is based on speculation (wink wink) in that the bailout package has not yet been approved.
I for one hope that does not get approved. This is a sentiment held among many; even many in Washington. As said by Jim DeMint (R-SC), “No, I don't support it and I probably won't support it in any form. It should not have come to this. We knew this was coming and we didn't do anything about it.”
If the US does nothing to bailout their firms the potential for the collapse of many major US firms is very real, but if those companies managed themselves into the ground, the taxpayers should have to do no more than perhaps dig their graves (and I'm not too sure we should even feel obligated to do that).
The great thing about the free market is that if your product or service is not competitive, your company dies. That may seem a little morbid, but that fact is the one that forces continual innovation. And if companies were not able to compete in the free market prior to these tumultuous times, how will a bailout package that further debases the world’s monetary unit help anything – especially when we consider that the $700 billion will be going to companies that have proven themselves incapable of competing in the global market?
If there was a time to help out these companies it was probably a couple years ago. As is, companies should not declare bankruptcy, but instead truly evaluate the worth of their assets and either sell (I hear Buffett is not afraid to buy) or have a frank meeting with shareholders are revalue their stocks. A learn-the-hard-way type of remedy is much more appealing than a let-the-public-save-you policy in my opinion; even at the risk of losing companies that have been lying to the public for years ...
What do you think? Should we pursue a bailout package? Did the Bush administration purposefully allow things to get so bad in order to pave the way for further support and protection for corporate America? What happens if a bailout package isn’t approved?
Thanks for reading.
GRMM
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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