Bailouts Killing Free Market Capitalism

Or another whiz-bang Federal Reserve program that keeps U.S. banks and brokers on the dole for a few more months.

Or more recently, a blatantly transparent attempt by the Securities and Exchange Commission to squeeze short-sellers and drive stock prices higher ... but only for a select group of 19 financial companies.

And things have only gotten dicier since then! The number of companies and executives lining up at the Fed's doorstep ... or the Treasury's ... or Congress' ... looking for bailouts gets longer every day.

The U.S. auto industry, for example, is panhandling in D.C. for $50 billion or more in federally subsidized loans to revamp their factories and product lines to produce more fuel-efficient cars.

Several banks are essentially living off the Fed, with borrowing at the discount window surging to an average of $19 billion per day in the week ended September 3. That's the highest in U.S. history and a huge increase from $1.1 billion a year ago.

And of course, we just saw Treasury bailout Fannie Mae and Freddie Mac.

According to the terms of the deal ...
Fannie Mae
Freddie Mac
Bailouts of the week. The cost: Nobody knows!

* The government will place the two Government Sponsored Enterprises into conservatorship, essentially taking them over.
* Common and preferred share dividends will be eliminated, and the government will buy a new class of preferred shares. This has left the original shares with little value.
* The senior and subordinated debt securities of Fannie and Freddie will be backed.
* The Treasury is going to open another secured, short-term funding facility that will be accessible to Fannie, Freddie, and the 12 Federal Home Loan Banks that support various private banking activities.
* The Treasury has also announced plans to buy mortgage backed securities in the open market. This is an attempt to manipulate the market in such a way as to drive down consumer mortgage rates.

But what's the cost of these bailouts? Nobody knows!

Now here's the thing: With each bailout, we the American taxpayers are told, this is in the best interest of the country. And with each bailout, we're told these bailouts are necessary to save the financial system.
Fed Chairman Bernanke paints a gloomy picture for financials.
Fed Chairman Bernanke paints a gloomy picture for financials.

Heck, if you think we've been bearish about the prospects for the financials, get a load of what Fed Chairman Bernanke had to say a few weeks ago about what would have happened if the Fed had let Bear Stearns collapse ...

www.marketoracle.co.uk...

I wonder why USA is bailing out companies on the expense of taxpayerss

is USA a nation of free market and free trade , or is it communism ...

[edit on 15-9-2008 by manson_322]

sorry for the one liner but

this is pure "corporate communism"... really sick.

reply to post by manson_322

These government bailouts are designed to prevent domino-like effects that could destabilize the financial system. The drawback of the this practice is that it encourages some money lenders to make risky loans, as they vie for customers, for example. Your reference to communism doesn't fit the realities. Even the idea of socialism doesn't fit, because the US government doesn't insist on overseeing the way the companies operate in order to stop imprudent practices or investments. The government simply bails the bad boys out when they screw up.

Hey, manson, you better check your BofA saving account balance first thing on Monday. The financial world seems to be in turmoil once again and your help has been greatly appreciated.

manson, dude, you think I'm kidding you, but I'm not.
blogs.moneycentral.msn.com...>1=33002

See? The Feds got tired of the red-hot dealing & wheeling and let one of the the empty piggy bank fall down. And that's your opportunity. On your way from the bank stop by the NYSE.
moneycentral.msn.com...

Just look at the volume! Heavy trading, ain't it? Buy some LEH stock for the peanuts and sit on it for a couple of years. It can get you a brand new Yamaha workstation.

No... free market capitalism is killing free market capitalism... if you study history it becomes evident that when businesses and markets are allowed to run themselves as it were they invariably go too far... the great depression is the prime example. Regulation, while itself can go to far, generally keeps them in line. Without them the greedy and unprincipled take advantage of the situation and create a mess that everyone else aka you and me, have to clean up. The credit union mess of the late 80's was a direct result of deregulation as is the housing crisis and the removal of restraints on speculators (thank you Phil "nation of whiners" Gramm) has helped fuel $4+ a gallon gas.

[edit on 15-9-2008 by grover]

reply to post by manson_322

You're smart guy, manson, for listening to me and not to them. But you're kinda ruthless. Today, I went to see my stock broker to buy some of the Lehman stock for myself, but was told that nothing much was left.



What kinda share holder are you, if you don't want to share and leave some of the hot LEH stock for others?

manson, what is this?



I didn't say that you unload.
Tell you what: Stay away from Wall St and get a job instead. I heard that the Central Bank is hiring.

There is a very fine line between free market capitalism and total anarchy. Businesses are going under and thousands of people are losing their livelihoods because of a handful of glorified professional gamblers acting in reckless, shameless self interest, trying to manipulate a system so complex and unregulated that not even the wealthiest and most powerful can understand it, let alone control it.

Obviously, taxpayers should not be forced to bail out private businesses which have collapsed due to the mismanagement and greed of their own directors. However, if such businesses are allowed to continue to operate without restriction or regulation, those same, ordinary working taxpayers will forever be at risk of unemployment and financial insolvency due to circumstances beyond their control, and beyond the control of their elected representatives.

To me it only become clear to every tax payer and citizens in this countries of who is really running our nation.

And to make it clear . . . those running this nation is not running the nation for the regular citizens anymore.

talking to my economics teacher today he said that it would be the end of capitalism. which got me thinking, when the economic crisis is over (how ever long that may be) will the american gov change anything or will they keep a free market?

Originally posted by marg6043
To me it only become clear to every tax payer and citizens in this countries of who is really running our nation.

Let me correct that sentence for you Marg my dear.

it only become clear to every tax payer and citizens in this countries of who is really ruining our nation

reply to post by Caramelli


The government are highly unlikely to alter the free market system, perhaps barring a catastrophic collapse, and even then those who profit most from this chaotic system would be extremely reluctant to allow any reform which might dent their obscene profits.

When individuals need money, the government professes free market capitalism. When rich people need money, the government gives freely from taxpayer money even though those executives are stilling making millions of dollars. We should let it collapse, and then other companies will fill the gap. The problem is created by those companies, and therefore keeping the problem around is not a good idea. Also, if the government hadn't let those companies become monopolistic, there wouldn't be an issue if they went under because the burden would be shared among many companies. If capatalism works so well, why can't the dollar survive against the value of the Euro? Why is it incredibly difficult for Americans to immigrate to European countries? The answer is because they have a better system and a better life for their people.