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Meanwhile, discussion of spending less than a trillion dollars over a ten-year period to ensure that these same taxpayers have access to affordable quality healthcare is decried as undue government spending and intervention. In short, taxpayers can be used to support giant corporations and their executives who are cutting pension and healthcare benefits, but one tenth of that amount cannot be used to provide the same healthcare -- and let's not even get started on the Social Security issue (Krugman 2009).
It has been claimed, and reasonably so, that economic decentralization can cause enormous macroeconomic havoc, and that for this reason federally funded bailouts make for sound fiscal policy (Wildasin 2001). This may be so, but it does not preclude the idea of corporate responsibility to the government or the taxpayers that fund it. In fact, such responsibility would be a natural assumption in any privately-funded merger, acquisition, or loan -- whichever construct one would like to apply to the bailout, in the private sector it would necessarily entail either interest payments or control of the company receiving the bailout funds.
The Auto Industry
The bailouts given to General Motors and Chrysler did include provisions for government responsiveness, and the federal government played a large role in reorganizing these companies as a part of the bailout deal, which is the major reason that Ford decided to go without additional federal aid (Business Week 2009). Even the massive amounts of money that these companies received, however, did not give the government or the public the amount of interest in the company that such a large amount of funds warranted, nor did it prevent executives at these companies from receiving large salaries while other employees had their pensions cut...
Again, the point of the bailouts was to prevent massive unemployment in one of the few large manufacturing industries still operating in this country, but if the companies were not able to run themselves in a manner that was able to keep them afloat, the least they could offer in return for the government bailout is a gesture of solidarity in reducing executive compensation.
Conclusion
These bailouts, though perhaps forestalling an even greater recession, did so without any real and immediate benefit to the taxpayers. The lesson seems to be that if your are rich enough and well-connected, screwing up doesn't cost you a dime -- there's a government just waiting to foot the bill.
References
Business Week. (2009). "Auto bailout: Crunch-time for Detroit." Accessed 17 October 2009. http://www.businessweek.com/bwdaily/dnflash/special_reports/20090325auto_bailout.htm
Faccio, M.; Asulis, R. & McConnell, J. (2009). "Political connections and corporate bailouts." Journal of finance, forthcoming. Accessed 17 October 2009. http://74.125.155.132/scholar?q=cache:tD0HjtjNmR8J:scholar.google.com/+author:%22Faccio%22+intitle:%22Political+connections+and+corporate+bailouts%22+&hl=en
Krugman, P. (2009). "Bailouts for bunglers." The New York times. Accessed 17 October 2009. http://www.nytimes.com/2009/02/02/opinion/02krugman.html
Nankin, J.; Umansky, E.; Kjellman, K. & Klein, S. (2009). "History of U.S. government bailouts." http://www.propublica.org/special/government-bailouts#savingsloan
Wiladsin, D. (2001). "Externalities and bailouts: hard and soft budget constraints in intergovernmental fiscal relations." IDEAS. Accessed 17 October 2009. http://ideas.repec.org/p/wbk/wbrwps/1843.html
When such biases enter into the decision-making process, they eliminate some potential courses of action. Related to bias is the illusion of validity. The biased parties envision an outcome that they would like to see and work backwards to justify their chosen course of action. That course of action may not lead to the outcome at all, but biases leave to the view that it does. Therefore, bias guides us
What is less certain is the benefits of the bailout -- those can only flow from taking advantage of the bailout to restore credit markets and prevent a repeat of this financial crisis in the future. Works Cited: Baker, Dean. "Subprime Rescue Plans: Backdoor Bank Bailouts." (2008): 9 pages. EconLit. EBSCO. 10 May 2009 Mishkin, Frederic S. "How Big a Problem is Too Big to Fail?" (2006). 18 pages. Journal of
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fall 2007, the United States economy was rolling along in a healthy fashion having enjoyed 24 consecutive quarters of positive Gross Domestic Product growth. The Standard and Poors Index was over 1,500 and unemployment was below 5%. There was essentially no inflation. These were all good numbers and normally indicative of a health economy (Bloomberg Business Week). Roughly 12 months later everything had changed. Treasury Secretary Henry Paulson surprised everyone
Therefore, these banks also benefit from the aid of their customers. This is because their customers have no interest in dividing these groups of banks. The financial help provided by Wall Street banks and other important international banks to different customers, requires that these customers also offer their help in protecting these banks from authorities' actions. Another argument used by groups that are in the favor of too big to
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