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Viewers Speak: Was the Bailout a Good Investment?
Sep 04, 2013
***Editor’s Note: Last weekend’s (August 31-September 1) Mailbag segment drew quite a bit of viewer reaction. We will first print a transcript of John’s comments, followed by several viewer comments…
Farm Report Mailbag:
Time now for our weekly look inside the Farm Report Mailbag. Carol Kirkhorn is concerned about my belief the bailout was a good idea. "Why are you a fan of our out-of-control spending (the bailout)?"
Carol, for many people it is hard to imagine any good out of government seemingly throwing money around at problems. But not only is that an inaccurate description, what Secretary Paulson and Presidents Bush and Obama did will, in my opinion, be a textbook example of prompt action to stop a panic. But the major point is it cannot be out-of-control spending if you get your money back. Look at the numbers: We sent about $250 million to banks to shore up their liquidity, $187 to Fannie & Freddie, $80 to car companies, $70 billion to AIG, $19 billion to buy questionable assets like CDO’s, and another 10 to subsidize homeowners for a total of $608 billion. Meanwhile, look what we’ve gotten back. Banks have repaid $367 billion as of August 27th, and the despised mortgage giants and others have sent $187 billion in dividends and interest to the treasury. Another reader pointed out the U.S. probably will lose money on their GM stock, but the cash still pouring in will soon make the whole $608 billion a remarkably good investment. Incidentally, this action is exactly what farmers demand the government do for their section when sugar and dairy prices drop…and in this instance I remain convinced it was a courageous and lucrative decision.
Viewer Response #1: John, while I appreciate your service to our country and the fact that you are a real farmer, I think that you are as crazy as a squashed cat if you think that the monetary policies that our government has pursued have in any way been beneficial. I am very surprised that a man of your education and experience would actually support such destructive fiscal policies. That is in my mind incomprehensible. Sincerely, Wayne Kahlbau - Fairhope, Alabama
Viewer Response #2: Hi John - In the mail bag this morning you were giving a rundown on what the government spent bailing out several businesses. While I and others feel that the auto industry only asked for a loan I do not count the financial aid Uncle Sam gave GM and Chrysler a bailout. That was a loan. Why that government official bought stock in GM was a person with a whole lot of screws loose or missing because the stock market has to be hit just right to make a gain and that is still a crap shoot. Frankly that was someone making a bad decision that went from bad to worse. It is going to take a while for the auto industry to get there stock prices back to what they were. The only way to make money on that dumb move is to be patient. James Brancheau
Viewer Response #3: You state you are convinced the bailout was a courageous and lucrative decision. Oh really? Since the government has no money except that which they tax, borrow or print it’s not very courageous to use money that doesn’t belong to you or is created without the corresponding production of goods or services. And in so doing, they reward poor decision makers and delay the purging of excesses that are needed so that real growth can occur that benefits the public. And lucrative for whom? The Comptroller of the Currency’s first quarter report shows total US bank notional exposure to derivatives of $231.6 trillion. This doesn’t include the trillions of liabilities banks are allowed to move off their books, such as mortgage backed securities which took down Fannie Mae, Freddie Mac and AIG. Four of the too-big-to-fail commercial banks account for 94% of this exposure. When the next big financial crisis hits, which will dwarf 2008, we will see just how "courageous and lucrative" the bailout was. Too-big-to-fail may just become too-big-to-save. Dave Sauers
Viewer Response #4: Thanks for taking the time to respond to my email. You set me straight and I am embarrassed that I jumped to the wrong conclusion without doing my homework. I saw on your website that you explained it quite thoroughly on your previous show. I apologize. I've always admired your level headed, bipartisan approach, guess I'll learn to do likewise.
Blessings, Carol Kirkhorn