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.

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Everyone’s favorite business to hate is now looking to ask the government to pay out $2.4 million in bonuses to executives at the company. This comes after just a few months ago, the company green-lit several hundred million dollars in bonus money that started a huge backlash against the company.

The company is hoping by asking the government to approve the bonuses, it can avoid the public outrage again. I think that right now, the government is not the place where the “public” has a lot of faith right now as far as large corporations go.

At least they are asking for permission before just handing out millions of dollars to executives. The company doesn’t actually need the permission of Kenneth Feinberg, the overseer of the compensation of top executives of seven of the largest companies that received federal bailouts. The $2.4 million in bonuses would go out to about 40 of the highest ranking execs at AIG.

“Anytime we write a check to anybody” it is highly scrutinized, said an AIG official, who declined to speak on the record because the negotiations with Feinberg are ongoing. “We would want to feel comfortable that the government is comfortable with what we are doing.”

In November, AIG’s top seven executives, including Chairman Edward M. Liddy, agreed to forgo their bonuses through 2009. Then, in March, facing pressure from Treasury Secretary Timothy F. Geithner and other government officials, the company restructured its corporate bonus plans for the remaining top 50 executives. As part of this agreement, the senior executives were to receive half their 2008 bonuses — which totaled $9.6 million — in the spring, with another quarter disbursed on July 15 and the rest on Sept. 15. The last two payments would depend on whether the company made progress in revamping its business and paying back bailout money to taxpayers.

So, here we go, a large corporation going back on their word…are we really surprised? I’m not. Especially when it’s a company that is the epitome of greed and what is wrong with our capitalist system. It’s companies like this that make everyone else look bad. I’m not saying that capitalism or the free market is wrong, but when you have this much wrong with one company…things go very wrong in a big way.

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.

Group of Seven finance ministers and central bankers said after a meeting that economic activity should begin to recover later this year. However, they said the outlook remained weak and there was a risk that the global economy may still worsen.

“We are right to be somewhat encouraged, but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy early last fall,” U.S. Treasury Secretary Timothy Geithner said in a statement.

The news is good coming from G7 considering during their last gathering in February they said a severe downturn would go through most of 2009 and gave no mention of signs of stability.

The financial chiefs pledged to act “as needed to restore lending, provide liquidity support, inject capital into financial institutions, project savings and deposits and address impaired assets.”

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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.

Malls across the country are being forced into foreclosure, as well as hotels and other commercial properties.

A problem facing commercial mortgages is that, unlike residential mortgages, they aren’t paid over 30 years, they are paid between 5 and 10 years, with most of the balance due at the end.

One thought was that the $700 billion bailout would go to help financially back some of the risky securities and help out some of these properties, however, treasury secretary Paulson said that the U.S. no longer planned on buying troubled securities. The news wasn’t welcomed by those who were in need of the bailout.

California, New York, Texas and Florida all have a large amount of mortgages in the securities market and will be hit the worst.

He is likely to announce New York Fed president Timothy Geithner as his choice for treasury secretary. Paulson could use some vacation time.

It has been a very volatile few months on Wall Street. It’s almost like a roller coaster, I know that metaphor (or simile) may be a bit cliche, but it really, truly is…and no one likes putting all their savings on the line when the markets are so unstable. It seems as though one day you could feel as though you’ve lost it all, then the next day gain most of it back.

These are strange financial times.

As far as politics and Buffet go, he is currently advising Obama on the economy and both John McCain and Barack Obama say he would make a good treasury secretary.

If Warren Buffet is good at anything, it’s making money. He is an excellent money maker…he’s even making money now.

One of the most controversial points made in the bailout is the inclusion of the limits on severance packages available to executives that would benefit from the bailout plan.

According to the plan, the Treasury Dept. will buy bad mortgage backed securities and other forms of bad debts that banks and investors hold. Some of the money would also be given to a program that would encourage some of the holders of troubled mortgage backed securities to keep the securities and instead buy insurance from the government to cover the defaults.

Also, to help the actual homeowners that are facing foreclosure, the bailout requires the government to try to renegotiate their mortgages to attempt to lower their monthly payments, so maybe they can keep their homes.

Overall it doesn’t seem so bad, however I believe we need more regulation of the markets to keep something like this from happening again.

Well it’s happening…the government is taking over Fannie Mae and Freddie Mac as soon as tomorrow…well this morning. These two mortgage lenders either back or actually hold HALF of the country’s mortgage debt…and they’re obviously in trouble. According to the AP, a government bailout of these two lenders could cost tax payers $25 billion…this is going to be a HUGE issue in the coming up election…hopefully.

According to consumer affairs website The Consumerist , this is how the bailout happened:

• Henry Paulson, the US Treasury Secretary, told Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron that not only them, but their boards were fired.
• Common shareholders will be almost completely done away while preferred shareholders, which are mostly banks, will be spared.

Most importantly, however, is that these two HUGE lenders will function as normal. Remember though, as a United States tax payer, you now own a portion of the homes backed by Fannie Mae and Freddie Mac. Lets hope things get better soon.