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Bailout is a temporary fix

Right Here, Right Now

Posted: October 9, 2008 8:40 p.m.
Updated: December 11, 2008 5:00 a.m.
What’s up with this Wall Street versus Main Street political buzzword gobbledygook?

We seem to have traveled back in time to the “It’s A Wonderful Life” world of George Bailey and Mr. Potter. I thought this 2008 presidential election was about “change.”

A government bailout by any other term is neither a rescue nor even a policy change. Call it a temporary fix.

It’s just a monetary infusion of taxpayers’ dollars into the credit and capital markets. In fact, the U.S. government has quite an established history of bailouts.

According to the nonprofit news source ProPublica, the Federal Reserve gave $3.2 to Penn Central in 1970 so it could free itself from commercial paper obligations.

This bailout was a message to commercial banks that the Feds would help them meet the credit needs of their clients.

Penn Central, however, remained shaky, and in 1976 the government spent $19.7 billion on a merger of Penn Central and five other railroads into a consolidated company called Conrail.

The government eventually sold Conrail at a big loss in 1987 for $3.1 billion.

American cities joined in the bailout spree in 1975 when New York City received $2.3 billion. The city continued using loan guarantees until 1986 for a grand total of $9.4 billion, but all the loans have been paid back, including loan fees and various premiums.

Chrysler was saved from insolvency in 1980 with a government loan of $1.5 billion that eventually grew to $3.9 billion.

The company’s stock bounced back, and by 1984 the government had netted $660 million from Chrysler.
The post-Sept. 11, 2001, Air Transportation Safety and Stabilization Act released $5 billion, plus an additional $10 billion in loan guarantees, to the airline industry.

The profit or loss from this bailout is clouded by a provision allowing the U.S. Treasury to purchase airline stock at below-the-market prices, aka creative financing.

If your head isn’t mathematically spinning already, consider what taxpayers have spent in 2008 alone. The Federal Reserve helped JP Morgan purchase Bear Sterns by providing a $30 billion line of credit.

Our government seized the giant insurance industry AIG to the tune of  $85 billion.

The U.S. auto industry received $25 billion of federal funds to be energy efficient and environmentally friendly. Who knows the final costs of the current crop of bailouts?

Before I could legally change my last name to AIG to get a billion or two, the government bailed out its own cutesy-named outfits Fannie Mae and Freddie Mac at a rock-bottom cost of $200 billion.

Foiled again! I begged my wife, Robin, to name our kids Fannie Mae and Freddie Mac. These are such simple names, and yet so rich sounding.

The Federal National Mortgage Association (Fannie Mae) was set up as a U.S. publicly traded government-sponsored enterprise that, along with the Federal Home Loan Mortgage Corporation (Freddie Mac), owned or guaranteed almost half of the $12 trillion U.S. mortgage market.

The government’s seizure of Freddie and Fannie kept them from declaring bankruptcy.

As the mainstream media tosses around blame for the current mortgage problems, it is important to remember that it was John McCain and three other U.S. Senate Republicans who led the charge to reform Fannie and Freddie in 2005 and again in 2006.

Sen. Christopher Dodd, a Democrat from Connecticut, prevented this bill from getting out of committee and onto the floor of the Senate.

Curiously, Dodd, who now serves as the chairman of the Senate Banking Committee, has been accused of being given preferential treatment by Countrywide, the leading Fannie Mae lender.

The latest bailout is for Wall Street itself. The original projected $700 billion bill failed in the House of Representatives.

An $800 billion bailout version, largely increased by earmarks, did, however, pass in the Senate.

Added financial benefits to specific congressional districts evidently proved enticing enough to some House Democrats and Republicans who changed their “Nay” votes to “Yea.”

The sweetened bailout passed.

While Senators Obama and McCain both approved of the Wall Street bailout, it has been McCain who has expressed outrage over the added earmarks attached by the Senate.

Candidate McCain said on MSNBC, “It’s insanity, and it’s an obscenity because it’s a waste of taxpayers’ dollars, and it goes on. ...”

As the presidential campaign has progressed and the issues have varied, the single most operative constant is the candidates’ call for “change.”

With all these bailouts, I don’t believe taxpayers can afford Obama’s “change you can believe in.” It means increased taxes to pay for additional government programs. It is the fast track to socialism.
Interestingly, even though our nation just lost 159,000 workers in the private sector, government jobs increased by more than 9,000. Go figure.

It’s all about Big Government getting bigger. Soon we’ll all be employees of the government. Isn’t that called communism?

Those of us in the Cold War’s “duck-and-cover” generation can still remember the fear of communism. Vote McCain.

The truth is that the 1940s “It’s A Wonderful Life” world of George Bailey and Mr. Potter has rapidly faded away in today’s culture. More than 70 percent of Americans now live in urbanized areas.

It is, however, a time-tested play rooted in traditionalism with religious undertones. Hey, wait a minute, that’s not politically correct in 2008!

Catch the play at the Canyon Theatre Guild this Christmas season. You’ll love it.

Paul B. Strickland Sr. is a resident of Santa Clarita. His column reflects his own views, not necessarily those of The Signal. “Right Here, Right Now” runs Fridays in The Signal and rotates among several local Republican writers.


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