Monday
May112009
It Looked Like A Good Idea At The Time
Monday, May 11, 2009 at 5:56AM
Coffee Brown, University of New Mexico, Talk Radio News
As an investment, it could have paid off. As a bailout, it’s likely to be the expensive consequence of a hasty yet necessary response, according to Sen. Bob Corker (R-Tenn.), who helped frame the $700 billion TARP bill and spoke about it today at the Brookings Institution.
Corker pointed that the $85 billion AIG funds were from the Federal Reserve, not the Treasury. He said that TARP, as designed, would have turned presently toxic investments into longer term equity, and taxpayers could have gotten their money back.
But since not enough requirements were included, and financial capital was used to shore up failing institutions, rather than buying assets, he thinks much of that money is never going to be recovered. If General Motors, for example, were to go Chapter Seven Bankruptcy, taxpayers would get nothing.
Corker said that financial principles are being made up on the fly, partly because the situation doesn’t lend itself to precedent. For example, the GM pensioners gave up about $12 billion in equity for a 2.5 percent stockholder share, while the UAW gave up about $10 billion in equity for a 39 percent share, and declined to accept a requirement to become competitive within 2009, he said.
Rather than regulate the past, “let’s move past this and figure out the right regulatory regime” which, he said, needs to work here and now, for the rest of the world and in unforeseen circumstances. “We have to come up with cause neutral regulations.”
Looking to the future, he said that the parties are just beginning to work together on Social Security and Medicaid which, if not addressed are heading into $86 trillion in obligations.
As an investment, it could have paid off. As a bailout, it’s likely to be the expensive consequence of a hasty yet necessary response, according to Sen. Bob Corker (R-Tenn.), who helped frame the $700 billion TARP bill and spoke about it today at the Brookings Institution.
Corker pointed that the $85 billion AIG funds were from the Federal Reserve, not the Treasury. He said that TARP, as designed, would have turned presently toxic investments into longer term equity, and taxpayers could have gotten their money back.
But since not enough requirements were included, and financial capital was used to shore up failing institutions, rather than buying assets, he thinks much of that money is never going to be recovered. If General Motors, for example, were to go Chapter Seven Bankruptcy, taxpayers would get nothing.
Corker said that financial principles are being made up on the fly, partly because the situation doesn’t lend itself to precedent. For example, the GM pensioners gave up about $12 billion in equity for a 2.5 percent stockholder share, while the UAW gave up about $10 billion in equity for a 39 percent share, and declined to accept a requirement to become competitive within 2009, he said.
Rather than regulate the past, “let’s move past this and figure out the right regulatory regime” which, he said, needs to work here and now, for the rest of the world and in unforeseen circumstances. “We have to come up with cause neutral regulations.”
Looking to the future, he said that the parties are just beginning to work together on Social Security and Medicaid which, if not addressed are heading into $86 trillion in obligations.
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