Failing by Saving the Bankers, and not the Economy

Robert Reich hits the nail on the head in his post Why CitiGroup is About to Be Bailed Out and Not General Motors

The nicely packaged summary:

Nonetheless, Citi is about to be bailed out while GM is allowed to languish. That’s because Wall Street’s self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy — the Treasury and the Fed. Their job, as they see it, is to keep the financial economy “sound,” by which they mean keeping Wall Street’s own investors and creditors happy.

Because the public doesn’t understand the intricacies of finance, it’s easily persuaded that this is the same thing as keeping credit flowing to Main Street. That’s why the public and its representatives have committed $700 billion of taxpayer money to Wall Street and another $500 to $600 billion of subsidized loans to the Street from the Fed — bailing out the investors and creditors of every major bank, including , momentarily, Citi — only to discover, at the end of this frantic and unbelievably expensive exercise, that American jobs and communities are more endangered than they were at the start.

GM, Ford, and Chrysler are requesting loans because the banks killed the credit market (providing credit is why we NEED banks, so that’s kind of failing at Job ONE).

It is not clear if President Bush and Speaker Pelosi are just bickering while Rome burns, or intentionally gave the $700B bailout to (former Goldman Sachs Chairman/CEO) Treasury Secretary Henry Paulson just to save Wallstreet, never intending to help Mainstreet.

Just imagine if we had an actual working Government what could be done.  Will Rogers once said, “Thank goodness we don’t get all the Government we pay for”.  Generally, I agree; it never makes sense to expect the Government to be able to manage the markets or economy better than the free market system.  When Government does do things, they tend to do the wrong thing.  In this case we have paid a huge amount to find the Government has done nothing to help, but spent the money.

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