Bitter about the bailouts

Posted by Courtney E. Howard

Is it the U.S. government's responsibility to bail out businesses on the brink of bankruptcy? Just this year, the federal government has bailed out AIG, Bear Stearns, Freddie Mac, and Fannie Mae.

Michael A. Hiltzik of the Los Angeles Times sums up recent months as follows: "The federal government has put up nearly $30 billion to avert a major financial default by the investment bank Bear Stearns; committed to investing up to as much as $200 billion in preferred stock of the loss-plagued finance giants Fannie Mae and Freddie Mac and at least $5 billion in their mortgage securities; and agreed to provide an emergency loan of $85 billion to American International Group Inc. in return for an ownership stake of as much as 80 percent in the stricken insurance giant."

I think it is not the government's responsibility, and it is just bad business. I could understand the Fannie Mae and Freddie Mac transaction given its repercussions on homeowners under their umbrella and the present status of the housing market; however, I cannot help but be disgusted that the government is now, essentially, in the real-estate business.

I think these bailouts set a bad precident, and in some cases rewards high-paying executives with potentially bad business practices. Hiltzik perhaps says it best:"critics contend that bailouts often encourage bad behavior by relieving underperforming industries of the consequences of their ineptitude."

Others in the know anticipate that more and more corporations will soon approach the government, hand extended.The government should be a helping hand to its beleagered citizens (kids and seniors without food, heat, and healthcare), not rich executives who gambled and lost in the corporate world.