Paulson Setting Up Massive Corporate Welfare

3:05 pm EST September 18th, 2008 | News | 9 Comments

At first glance that’s how this sounds to me.

Treasury Secretary Henry Paulson is working on a plan that would set up a government facility to take on bad debts from financial institutions, preventing a worsening of the global credit crisis, Wall Street sources have told CNBC.

The facility would be similar to the Resolution Trust Corporation, which was set up in 1989 to take on all the failed thrift assets during the savings and loan crisis, these sources said.

Paulson is said to be shopping the proposal to lawmakers in Congress, a congressional aide told Reuters.

Such a move, according to its advocates, would allow banks to shovel bad debt off their balance sheets and send them back to business as usual.

It is mighty interesting that conservatives think individuals who aren’t in the same economic class as the McCains just need to suck it up, but Wall Street types who mismanage their businesses need a giant taxpayer funded safety net.

Topic: Business, Economics, Economy, George W. Bush

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9 Responses to “Paulson Setting Up Massive Corporate Welfare”

Big Dan says:

September 18, 2008 at 3:31 pm

The mother of all bailouts borne on the backs of the taxpayers all so we can go back to the banks and beg for more debt…
Quaker in a Basement says:

September 18, 2008 at 3:41 pm

The facility would be similar to the Resolution Trust Corporation, which was set up in 1989 to take on all the failed thrift assets during the savings and loan crisis, these sources said.

Now hold it right there.

Paulson is proposing a facility to take on bad debt. Resolution Trust took over assets. Saying the two are similar is like saying the Titanic is similar to an iceberg.
william says:

September 18, 2008 at 3:52 pm

Nobody in their right mind wants this nonsense. To suggest that conservatives want to bail out Wall Street just for shits & giggles is laughable.
Parthenon says:

September 18, 2008 at 4:06 pm

Lemme know if I’m off base here…

The banks are protected by the sobering fact that everybody’s hurt, directly or indirectly, if too many of them fail. Sadly, it’s in our interest to prop up their shifty ways.
mike in dc says:

September 18, 2008 at 4:19 pm

I’m okay with it if every person with an ARM or other crappy sub-prime mortgage is permitted to refi to a regular, manageable mortgage, as part of the deal.
SFC B says:

September 18, 2008 at 5:20 pm

Mike in dc, I doubt that someone who defaulted on of the the ARMs would be able to afford a fixed rate mortgage at an interest rate which they earn through their credit score.

The homeowners who got themselves into this have probably spent the past several months to a year missing payments and having their credit scores ravaged, if they hadn’t already filed for bankruptacy. This is going to suck, and suck hard, for the homeowners and their families which will get no relief from this.

On the plus side though, the housing market going to crap should make my commute easier since they won’t be closing as many roads in my area for home-construction. Yay me!
Sean D. Martin says:

September 18, 2008 at 6:18 pm

mike in dc: I’m okay with it if every person with an ARM or other crappy sub-prime mortgage is permitted to refi to a regular, manageable mortgage, as part of the deal.

Works for me.

It’s oversimplifying considerably, but wouldn’t much of the mortgage crisis be eased if those who are losing their homes because they can’t afford a mortgage were allowed to refinance at a more reasonable rate?

If I loan someone money and they eventually can’t make the 10% interest rate I can a) let them negotiate to a lower rate or b) foreclose on them. With “a” I continue to get some money coming in. With “b” I lose income while holding an asset that is losing value while I search for a new buyer who is likely only willing to pay what I could have negotiated with the original owners.
Sean D. Martin says:

September 19, 2008 at 11:16 am

william: Nobody in their right mind wants this nonsense. To suggest that conservatives want to bail out Wall Street just for shits & giggles is laughable.

You’d be surprised at the number of conservatives who don’t actually seem to be in “their right mind”. And I don’t think anyone suggested those who support the idea of bailouts do it for “shits & giggles”. Rather its from greed, unwillingness to hold people responsible and (being not in “right mind”) because they just actually think it’s a good idea.
Tone says:

September 20, 2008 at 6:54 am

Hitting some of the top points.
The ‘homeowners who got themselves into this’ did not do so in a vacuum. The bankers (and advocate groups, granted) asked for policy changes that opened up business to people who did not have the financial traction to buy large items. The reason it was allowed was to profit, housing, white goods, cars ALL those manufacturers made hay. The citizen-consumer had a better standard of living (if you allow that newer stuff = better) than their earning/spending habits would have permitted.
Next place business gains from these relaxed policies, is in the labor market. working folks can now get credit (from your TV no less!) to buy the things they’re working for, so they don’t press the employer for wage increases to keep up with the price increases.
Rubber and the Road: As a class, business gets more credit customers paying higher vig on the loans, AND gets the labor at a rate that is artificially low compared to the prices that business charges for all that NEW STUFF. Yay, mo’ money, mo’ money!
Let’s call this BAD BEHAVIOR, for the sake of discussion.
A common complaint about welfare’s effect in the community is that it shores up BAD BEHAVIOR. So called Conservatives say that witholding assistance will cause the community to change their patterns. SAME DEAL HERE, Conservative my @$$!! just different rules for ruling class.