Democrats & Liberals Archives

Too Big

When the current depression came to the attention of this administration, the cry came out from almost everyone that we must save our huge financial institutions because they are “too big to fail.” So we plopped down $700 billion to save companies that were responsible for the terrible economic mess we are now in.

Now we find that the treasury department approved a new loophole that enables banks to save on their taxes as well. The loophole: A bank must buy a faltering bank:

A tax change put into effect by the U.S. Treasury Department provides new federal and state breaks for banks that take over other failing financial institutions. The subsidies come on top of the $700 billion in bailout money that Congress authorized as part of the federal rescue plan.

The government is enticing big banks to buy small banks, something that will lead to huge banks - the kind that are "too big to fail." This is ridiculous. Here's what has already happened:

Days after the tax rule was changed, Wells Fargo successfully moved to acquire Wachovia Corp., whose losses on loans could reach more than $70 billion. Tax experts at Jones Day and elsewhere have projected that those losses will allow Wells Fargo to claim $20 billion to $25 billion in total tax breaks.

$20 billion to $25 billion! Wow! And who gets all the benefit? Who gets rich while Wachovia workers are fired? Wells Fargo. This deal also has repurcussions on revenues of the states - and it ain't pretty:

Most of the tax advantages will be claimed on federal returns. But state tax board figures obtained by The Times show California will take a $300-million hit this year. In subsequent years, that sum would gradually drop until the $2 billion in tax breaks is exhausted.

So not only do we make huge financial organizations "too big to fail," we reduce the money that financially strapped states collect. All of us ordinary people suffer.

To save our economy, both now and in the future, we must reduce the size of banks and other corporations so that they are not "too big to fail." To do this, we must reintroduce anti-trust laws. Too big is too bad.

Posted by Paul Siegel at November 11, 2008 7:13 PM
Comment #270185

Great post Paul,

This crap is coming from the same people that tell us we can’t have one-payer health care. Supply and demand style capitalism was broken when the corporations took over our government! All we have now are greedy people seeking more profit at the citizens expense. Too big to fail is too big to exist.

Posted by: Mike the Cynic at November 12, 2008 7:40 AM
Comment #270187

Paul, has it not been obvious since GW Bush took office that the words ‘anti-trust’ have had no meaning whatsoever beyond insider rewards of campaign and punishments toward potential supporters and campaign contributors?

GM is already too big, and the oligopoly of Ford, Chrysler, and GM, all making the very same fundamentally flawed economic mistakes, has resulted in the entire American auto industry plummeting, and their lobbyists and Michigan politicians dipping into our pockets to pay for their hubris and arrogance.

Our representatives need to find buyers for these corporations with management history that is proven to be heads above that of those to date. Court private sector buyers and use tax dollars to close the deal. That is the cheapest solution for tax payers, and the most effective for revitalizing the jobs sector of this industry.

Posted by: David R. Remer at November 12, 2008 8:18 AM
Comment #270196

According to Robert Ruben on NPR this morning, we already have a procedure for corporations that are to big to fail. It’s called chapter 11.

Posted by: Mike the Cynic at November 12, 2008 11:01 AM
Comment #270197

It kills me that we are rewarding unrepentant crooks and incompetents. However, these bailouts must happen if we are to save this country from future financial ruin.

What gets me though is where is the oversight? We should OWN these damn companies until they pay us back with interest on everything we’ve been forced to lend them. They should not be allowed to sit on their bailout money.

Finally, is Bush in a race to see how much money he can allocate in the most stupid way possible before Obama is in charge?

Posted by: Max at November 12, 2008 11:21 AM
Comment #270218

Max: They are not setting on the bailout money. The government wanted them to loan the money out but, only an idiot would lend money in this economic environment. Instead, they are giving the money to their investors in the form of dividends.

I saw Obama today, He had Pelosi on his shoulders and she was waving a huge banner that said, Be afraid, be very afraid. We must bailout the corrupt and or incompetent management that gives us our reelection funds and if you don’t shut up and let us do it we will put all of you out of work.

No one should be suprised by what has happened. We have seen it coming since the eighties. When Reagan was elected, the democrats rolled over and exposed their bellies. The democrats sold out to the wealthy and their corporations. Since then the democrats have compromised the workers time after time.

The taxpayers in this country should not grant one dime of bailout money for these corporations unless and until every member of management is unemployed. Since the voters were unwilling to remove many corrupt politicians, I am fairly sure that they won’t put up a fight about this, especially the liberals. The real problem is that the left has been neutered.

Posted by: jlw at November 12, 2008 2:59 PM
Comment #270235

There is evidence that the middle class is still taking on a great burden of financial debt just by looking at the rise in the cost of living. The Wall Street Journal reports that the Treasury has decided to “hold” the purchases of mortgage related assets, purchasing these assets would help relieve some of the middle class pressure of losing their homes. Out of $700 billion only $60 billion is left to provide aid to the country’s current economic state. The Treasury’s decision may have a positive long term effects, but currently the middle class may not see any relief.

Posted by: Kalender Schultz at November 12, 2008 9:40 PM
Comment #270249

Kalendar, Paulson and Bush are demonstrating what an incredibly true Republicans they are. They are following their original proposal as closely as they possibly can, which was to effect a transfer of wealth from future tax payers to the corporate echelons and shareholders, as fast, and in as vast amounts as possible.

This has a double return for Republicans. Besides the obvious securing of corporate loyalty to their Party, it so dramatically elevates national debt as to make saving Medicare and Social Security virtually impossible. A goal of Republicans from 1994 on has been to end these programs. The shortest political distance from 1994 to ending these programs was an historical and unprecedented growth in the national debt and interest payments on that debt.

It will have the effect on future tax payers of so burdening them that they will have to choose to end Medicare and SS in order to have enough wages for the daily priorities like housing, energy, food, and transportation.

And where are Democrats in all this? Befuddled and confused, awaiting their leader Obama to point the way.

Posted by: David R. Remer at November 13, 2008 9:22 AM
Comment #270269

Befuddled and confused, waiting for the Messiah?

And the meek shall inherit the world.

do do do do do do do do do do do do

Posted by: jlw at November 13, 2008 1:31 PM
Comment #270281

We’re still in the Bush administration, in case people are confused about that, and Neel Kashkari is the person most responsible for what happens in the bailout. I also wasn’t aware that we are in a “depression”, so I guess the older generation were lying about how tough that was.

Any member of the USHOR who votes to bailout GM should be sentenced to community service, preferably cleaning public lavatories without a brush.

Posted by: ohrealy at November 13, 2008 4:59 PM
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