So do bailouts really work? “It is certainly correct to let businesses fail... if they could not face the challenge from competitors. Creating more debt, will only lead to more problems down the road,” advises Lok Sang Ho, Director, Center for Public Policy, Lingan University, Hong Kong. Given the background, it is clear that the longer the crisis lasts, the bigger the bailouts would be. And there lies the catch – the billion dollar bailout plans which aim to provide credit to these failing institutions for a limited time will definitely not work!
Now, let’s talk about the Detroit giant - GM. Wagoner in his letter to the American Congress wrote, “By lending GM money, you will provide us with a financial bridge... This will allow us to keep operating and complete our restructuring...” (Right Rick, and then we can all go and compete in the American Idol!) The hearts in the Congress melted, and GM received a bailout package of $18.88 billion between December 29 & December 31, 2009. So did the ‘bailout creamed with benevolence’ help?
Not by numbers. Its Mcap has fallen to a pitiful $0.89 billion today and it returned losses tantamounting to $52.8 billion in the past year. Further, Wagoner has requested for another $21 billion from the Fed! (Oh! whatever happened to those past billions?) Commenting on GM’s worsening condition, Jack Welch, Former CEO, GE, also wrote, “The automakers’ boards should take the courageous step of putting their companies into bankruptcy!” Well, the Treasury needs to realise this. Even Barry Ritholtz, Lead Analyst, RGE, while talking about the AIG bailout avers, “AIG was essentially two companies under one roof. The government should have only rescued the life insurance side of AIG and left out the other gambling side.”
Really, ‘better to be bankrupt than dead...’ Didn’t some wiseman say this before? (Surely, he wasn’t from the Fed or the US Senate, was he?)
Now, let’s talk about the Detroit giant - GM. Wagoner in his letter to the American Congress wrote, “By lending GM money, you will provide us with a financial bridge... This will allow us to keep operating and complete our restructuring...” (Right Rick, and then we can all go and compete in the American Idol!) The hearts in the Congress melted, and GM received a bailout package of $18.88 billion between December 29 & December 31, 2009. So did the ‘bailout creamed with benevolence’ help?
Not by numbers. Its Mcap has fallen to a pitiful $0.89 billion today and it returned losses tantamounting to $52.8 billion in the past year. Further, Wagoner has requested for another $21 billion from the Fed! (Oh! whatever happened to those past billions?) Commenting on GM’s worsening condition, Jack Welch, Former CEO, GE, also wrote, “The automakers’ boards should take the courageous step of putting their companies into bankruptcy!” Well, the Treasury needs to realise this. Even Barry Ritholtz, Lead Analyst, RGE, while talking about the AIG bailout avers, “AIG was essentially two companies under one roof. The government should have only rescued the life insurance side of AIG and left out the other gambling side.”
Really, ‘better to be bankrupt than dead...’ Didn’t some wiseman say this before? (Surely, he wasn’t from the Fed or the US Senate, was he?)
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