A Real Economic Stimulus?

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”  (Alan Greenspan, former Chairman of the Federal Reserve)

Greenspan expressed dismay that the lending institutions did not look after their shareholder’s interests.   But he may have been wrong – but mostly in terms of the time frame.  He assumed the lending firms would be interested in their shareholder’s bottom line before there was any economic meltdown and government bailout.   But his timeline was simply too short.  For according to the Associated Press, Uses for $700 billion bailout ever shifting:  “But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.”

It’s all quite legal according to the bailout plan sold to the congress by the Bush administration.

When the price of the entire bailout-economic stimulus is calculated, it may come close to $1 trillion.  Perhaps, if a truly comprehensive plan had been considered, instead of intervening in the market in such a way as to save lending institutions and wall street brokers who made very risky and very bad decisions, congress should have considered divvying up all the monies they would have invested in failed and failing companies and given each tax payer a $5,000 tax rebate.  Now that would have caused a real stimulus in the economy.

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