The Bail out

“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” - Alexis de Tocqueville 

There is a lot going on in todays world.  The dollar is back in a freefall.  The housing bubble has burst. Pretty much every financial institution is failing. America is involved in two wars, and oil is near it’s all time high.

What are we as a country going to do?  There are many opinions and beliefs as to what our country needs to do in order to return to the dominance we took for granted. 

In this article, I am going to present a few different perspectives pertaining to the $700 Billion dollar Bailout that is currently being debated in Congress.  

Mark Cuban – Billionaire owner of the Dallas Mavericks – has been particularly vocal as of late on his popular blog.  He, like most Americans, is noticing the long-term impact the next few months will have on the future of our country.  His understanding of the current economic situation is particularly uncanny.  He provides a unique view of handling this bailout.  He has lost faith in the ‘institutions’ that got us into this mess.  Mr. Cuban questions the ability of these bankers to fix these problems if they are bailed out.  Mark goes on and presents an alternative to the taxpayer bailout – eBay it.  Mark Cuban presents an interesting opinion and proposed solution to our current crisis that involves auctioning off these enterprises.  

There are also some differing views from other experts regarding this current American dilemma. Peter R. Orszag, director of the Congressional Budget Office, testified recently on the possibility of this bailout further damaging our current crisis. He is quoted as saying, “the bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.”  Mr. Orszag states that there is a possibility of insolvent line items on the books that could be exposed and could irrepairably damage a company. These Write-downs and insolvencies could plague the financial sector beyond any short-term repair. This article is available here. 

There is one final article I have read of profound interest.  This article proposes that the Paulson plan could be a hidden blessing in disguise.  This article suggests that the “small” investment now of $700B.  Could generate between $1 and $2.2 Trillion dollars for the government in a relatively short timetable. Kessler references Warren Buffett’s recent investment in Goldman Sachs and other investments over the past few decades as possible benefits from this bailout.  Kessler states that, “Over 10 years this could change the budget scenario in D.C., which can also strengthen the dollar. The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward’s purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson’s Folly.”  - The Paulson Plan Andy Kessler

It is interesting to see such different opinions regarding this critical bailout plan.  Who’s going to be right?  Only time will tell.