The Fed may lose its ability to bailout huge companies

Jennifer McClelland | RSS | Thu, Oct 29 2009 | 1 Comment

According to U.S. Treasury Secretary Timothy Geithner, the Federal Reserve should lose its ability to bail out “big, failing financial firms like AIG and Bear Stearns.”

He said, “Any firm that puts itself in a position where it cannot survive without special assistance from the government must face the consequences of failure. The proposed resolution authority would not authorize the government to provide open bank assistance to any failing firm.” He went on, “We cannot put taxpayers in the position of paying for the losses of large private financial institutions. We must build a system in which individual firms, no matter how large or important, can fail without risking catastrophic damage to the economy.”

Many taxpayers would agree with Geithner, while many of the banks would likely not. I have to say that I do agree with him to a point definitely. With as much money as we, as American citizens, have invested in these companies, we should be able to control them a bit better than they are now (for example, we should definitely have been able to do something about the grossly overpaid executives at AIG). However, once we start controlling the companies, people start screaming about how it is not right in a free market system.

Geithner suggests that large firms that are failing should be received by the FDIC and then it can decide whether to “unwind, dismantle, sell or liquidate.” If these companies should so choose to liquidate, then they can be purchased by other companies or they can be broken into many other branches.

The main reason why I feel like this is such a good idea is that I think that companies should be held responsible for their actions. Like the picture posted above (which I know I posted as a funny post a week or so ago), these banks are allowed to steal and “plunder” and still be able to escape with all their loot. It is not the way a company is supposed to be run. These companies should have been forced to figure out a way to liquidate or sell from the beginning. Allowing them to continue to operate with the taxpayer’s money is absolutely insane. Particularly when you consider companies that took BILLIONS (like, AIG). Those companies will never be able to pay back that money.

At least when the government bailed out the car companies, there were hundreds of thousands of blue collar workers that were benefiting because they wouldn’t be losing their jobs. At the same time, the executives of those companies weren’t taking outrageous salaries either. It is as though the financial companies that took the bailout money do not run on the same system. It is just absolutely ridiculous how out of control the whole thing got.

Source

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Tags: bank assistance, catastrophic damage, treasury secretary

The price of oil falls as OPEC mulls production cuts

Jennifer McClelland | RSS | Tue, May 26 2009 | 0 Comments

It seems as though the Oil and Petroleum Exporting Countries, or OPEC, has finally gotten exactly what they want. The price of a barrel of oil reached six month highs the other day and now there is a looming meeting of the countries to discuss whether or not to cut production.

At this point in time it appears as though a production cut is not going to happen, and the only reason that anyone can come up with is that OPEC was finally able to get exactly what it wanted. Meaning, the price of oil went up and their wallets started getting fat again.

The price of oil isn’t growing on actual demand for the commodity; the price is rising because stock markets all over the world are rising. Usually the price of oil rises with the markets and the markets usually begin to gain in the months prior to growth in industrial production and a reduction in unemployment.

It is nice to think that the recession could be coming to a close soon. When you look at the price of oil, however, it peaked seven months into the current recession (after all, the recession, according to reports, started in December of 2007).

Now, when the majority of your income depends on the price of commodities, not necessarily oil, it is important for the economy to pick back up. Then again, it is important to everyone for the economy to pick up.

Whether you’re income is tied to commodities, you’re a new graduate who really needs a job to start paying back some of those outrageous student loans, or you’re a home owner who is trying to sell your house to move to a place where you can find a job, the health of the economy is so important.

Hopefully the treasury secretary and Ben Bernanke were right when they said that the recession would be ending by the end of the year. It will be nice to see some economic growth, even if it means higher gas prices. At least when the economy starts picking up, many of us who don’t have jobs right now will have them later, and we can actually afford the gas.

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Tags: oil, ben bernanke, stock markets

There may be an auto bailout by Wednesday?

Jennifer McClelland | RSS | Mon, Dec 15 2008 | 0 Comments

News today from the Bush Administration says that they may pass the auto bailout on Wednesday. Like the proposal from the U.S. House of Representatives, the money will be coming from the banking bailout funds.

Treasury Secretary, Henry Paulson, said that the government would not just lend the money blindly to the auto industries without a guarantee of their long term viability.

Even Senator Bob Corker from Tennessee is even willing to reach a compromise, but wants there to be tougher restrictions and guidelines for the automakers.

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The Fed may lose its ability to bailout huge companies

Tags: treasury secretary, house of representatives, government