Bail-out Blues

October 05, 2008 by susan
man in suit leaps from cliff

In the comments following my post on the Obama/McCain debate, Poet and I got to talking about the bail-out, with me saying that in the end, we had no choice. Maybe so, says Poet, but we should have demanded better terms and conditions before we swallowed the pricey potion. And he's right, but I'm not sure we had the time to do that. Read on? Please do.

He probably knows far more about the $700 billion bail-out bomb than I do. I'm guilty of looking only at the overview, listening to both sides argue over the pros and the cons, without reading the fine print. (Did anyone?) What I took from all that was that there's a barge-full of cons and a dinghy full of pros, if that. But that in the end, it had to happen, based on the severity of the crisis.

As you may have guessed, my understanding of financial markets goes about as far as my check book. But yesterday on Ira Glass's This American Life, I heard about the way huge loans are processed every day in something called the "paper market" and how we were about one day away from an all-out implosion if the bail-out didn't happen.

The guy Ira was talking to is a typical bean-counter sort of schlub, who explained how billions of dollars of loans are made daily to businesses of all sizes, from the 12 person exterminating business to the 12,000 person Home Depot business, and paid back in the next day or two. Something like that.

Most all businesses in America depend on this system due to the normal fluctuations in revenue and expenses. So they are loaned a big amount of cash one day and pay it back the next when the cash supply is flowing the other way. Sort of like the locks on the Mississippi River that allow ships to go both ways. (Sort of.)

Anyhow, the schlub was furious at the lack of oversight, the mismanagement and so on. He said he originally opposed the bail-out but by the time the bill came up a second time, he supported it because he was terrified. He said there was simply no money left to lend out for the next day's business cycle. Apparently this is literally billions and billions of dollars that flows in and out every day. Who knew? (Well, lots of people I suppose.) He said companies would not be able to buy the materials they need to make their product or conduct their business. Think of the exterminator who can't buy the necessary tools of the trade for that day's work. No roach-killin' chems, no house calls; no house calls, no work; no work, no revenue; no revenue, no paychecks; no paychecks, no payments on cars, houses, no going to movies or shopping or dining out -- and no money to hire an exterminator, so learning to love the roaches who are going to inherit the earth someday anyway.

I'm going to have to read the transcript of Ira Glass's show, because I can't remember where all these billions that flow and ebb everyday are coming from, but the schlub said that without the bail-out, they weren't going to flow because they weren't going to exist.

My slim grasp on this limits me to the metaphor of the river locks. You have to open the upriver gate to let the water flow in before you can open the lower gate and let it flow out. If you don't, commerce grinds to a halt.

In the bail-out, Bernanke and Paulson, questionably in charge to start with, are belatedly trying to operate the locks. Trouble is, thanks to the Repubs love of all things deregulatory, a handful of crooks made off with our water. All of it. So hey kids, can we borrow some of yours? Like, all of it? And your children's too? Don't worry, it's a good investment and we'll, wink-wink, pay you back.

The schlub still doesn't like the bail-out, but it staved off the crisis, short term. Meaning, I suppose, until after the election. As George Bush himself noted yesterday, he's still got a couple of hard months to go. The rest of us will be reeling for decades.

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Poet (not verified) | October 8, 2008 - 6:29am

While I have not heard that particular edition of This American Life, I am a big fan of Ira Glass and suspect he did his usual good job of story telling. To give you another slant on the problem created by this bail out let me give you a "stump speech" for anyone who would dare to give it.

What could we do with a trillion dollars(the bail-out and related indulgences for the likes of AIG)--It al;so works for our trillion dollar wars of agression in the Middle East.

With a trillion dollars you could:

fully fund social security into the indefinate future..

revive and upgrade rail passenger service throughout the nation for reliable, far less energy-dependent transportation.

fund single-payer healthcare coverage for everyone (HR 676).

make a sizable dent in the upgrading and repair the crumbling infrastructure.

promote the development of renewable, sustainable, non-polluting energy sources (translate: solar, wind, tidal, and geothermal generation).

repair the damage in the Gulf coast regions of the US from severe hurricanes over the past three years.

Instead, this adminstration (with the willing and complicit help of the Democratic Party) has chosen to use one trillion dollars to bail out Wall Street's fraudulent gamblers (whom they both enhabled by supporting the deregulation of Wall Streel dealings in the 1999-2000 era).

Both political parties have chosen to continue funding for the pointless wars of aggression they started in the Middle East.

America can and must fo better.