Business advice

Will we ever know what happened to the bailout money?
December 26, 2008, 3:12 am
Filed under: Blogroll, Business Advice | Tags: ,

Right now it appears as if that is doubtful. I did some research on it and discovered that there were many bailouts: different investment banks, at least 21 banks and then there is the auto industry. The total is hovering around $1 trillion.

Since we have a system where the government doesn’t have right to grill the CEOs of public corporations, we can only ask. Congress did ask and they weren’t satisfied with the answers.

They weren’t the only ones that have asked. The Associated Press (AP) surveyed 21 banks, all of which had received at least $1 billion dollars in bailout money. They were asked the following: how much had they spent; how much had they saved, what were they planning for the future? None of the banks gave specific answers.

I also researched this issue on the Social Network, Linkedin. One woman told me that her brother-in-law, the President of a pretty big bank, confided that the banks that had received money were holding on to some so they could buy out other banks that might fail down the road.

If they, the Treasury, etc., bailed out the banks, including investment banks, how did they have money left over to hand some to the auto industry. I saw a picture of President Bush explaining that the money was coming from the banking fund. This seems to infer there is still money to be handed out? Are we falling asleep at the wheel here?

Why are we handing out money without asking for any of the corporations involved to give an accounting? This makes absolutely no sense. It also seems to be bothering some the news reporters who cover these types of issues, since there have been several articles written on the subject.

During the horrific times of the troubled savings and loan industry (the 1980s), there were bailouts, but there was also over seeing going on. Congress granted them rights to take on other loans, other than housing, in 1980. There were changes and there was a committee who oversaw all of this. Later on the Resolution Trust Corporation was formed to deal with the S&Ls that had been taken over by the regulators. There were many changes to this industry because of the failures and the resulting bailouts. There was overseeing coming and going.

Now, that we have banks and investment banks asking for the same, we should expect legislation that will ease this situation into the banking market’s next phase. But we are seeing no such thing. This is a job for the people handing out the money. I am presuming there will be letter writing to our faithful legislators in the near future if it hasn’t started already.

The question of the auto industry leaves one wondering. This is not the first time the auto industry went crying to Washington. Lee Iacocca had to do it in the 80s to keep Chrysler from going under at the time. Now, the problems are bigger, and the companies are asking for enough money to stay in business awhile longer. They are actually using the money for daily operating expenses. This doesn’t sound like an investment a wise loan officer would make.

It seems reasonable to expect that an increase in regulations for any industry coming to Congress for bailout money should be on the horizon. If not, then we have nobody to blame but ourselves. We live in a democracy. If we don’t like what’s happening, then it’s up to us to take action.

This will be an interesting situation to watch.

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