Posts Tagged ‘bailout’

Synovus Decides to Accept Fed Assistance

November 15, 2008

  Synovus is no longer “looking” at the prospect of participating in the federal government’s financial business bailout; the decision has been made to do it.  Tony Adams writes for the Ledger-Enquirer that Synovus recieved preliminary approval from the U.S. Treasury to sell $973 million of its preferred stock.

  When I broke the story on October 15th that Synovus was “looking” at the fed’s offer, I reported that I suggested to Synovus Chairman and Chief Executive Officer Richard Anthony that the sale would mean the federal government would own part of Synovus. He agreed that it would, but it would not be able to vote the stock because it would be preferrred and not common stock. 

  Richard Anthony, Chairman and CEO, Synovus    

Richard Anthony, Chairman and CEO, Synovus

  Anthony told Adams, “What this capital does for the system and the individual banks is during this period of weakness and instability, it provides a new dimension of strength that I think we can use to our advantage from an investment standpoint, from a customer standpoint.” 

  Over the long haul. this development could even help the federal government. There is a good chance that it will make a profit when it sells the stock later.

  You can read the Ledger-Enquirer story by clicking on this link.

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Is the Money Going to the Wrong Place?

October 18, 2008

  This is not 1932, you might say when we compare today’s financial disaster with the Great Depression. No, it’s not.  But, there are similarities. You know, things like the stock market crashing and banks failing.

  This time is also different in that the government is pumping money into the banking system to keep it viable. However, there are those who say that’s the wrong way to go.

Franklin D. Roosevlet Library)

Pres. Franklin D. Roosevelt, 1932, Whistlestop Campaign, New Albany, IN (Courtesy: Franklin D. Roosevelt (Library)

  They are not opposed to the government intervening in the crisis, but they think the intervention needs to give relief to the average American, not just the banks. They point out that this is a good time to rebuild the nation’s infrastructure. That harkens back to President Franklin D. Roosevelt’s public works programs.

   “There is no way a modern economy can function without good roads, telecommunication, rail transport and an educated labour force,” Allan Mendelowitz told , a member and former chairman of the Federal Housing Finance Board, told  Adrianne Appel of Inter Press Service.

  Using money for those things provides jobs, which means that people will have money to spend, and since our economy depends heavily on consumer spending, it makes sense to target working Americans when deciding on where to prop up the economy.

  Appel’s article reports that critics of the Bush administration say he waited until he could wait no longer to do something to stop the economic bleeding. They don’t believe he really wanted to do it because it flies in the face of the ideology he has been espousing. But, he really has no choice if he wants to prevent another Great Depression.  But, the way he is doing it follows his philosophy of giving to the wealthy and hoping it will trickle down to the rest of us.

  “Just think if we used those billions directly on jobs,” said Lewis Pitts, a public interest attorney in North Carolina.

  “In the developed world we have the worst income distribution of any country. A smaller and smaller portion of our population has a larger claim on wealth. This manifests in that the working poor have less and less income and have a harder time making ends meet,” Mendelowitz said.

  So, in that sense, we are back to 1932.

  Congressional Democrats plan to start working on help for the average American, planning to allot $150 billion for roads and other infrastructure programs.  But, Senate Republicans would probably filibuster any attempt to do that, or, if they didn’t, President Bush would probably veto the bill. That would mean a delay, but he’ll be gone in January and, if Sen. Obama is president, it will probably become law. McCain? It’s hard to tell. He did buy into the Bush economic program, but he is not, as he says, Bush, and he does have a habit of changing his mind.

Another, and Quite Interesting, Perspective on the Financial Crisis

October 1, 2008

  I’ve decided that another comment I have received to a post is important enough to run it as an article post. Redoubt, of the Sin City blog, who makes a lot of sense about a lot of things, has an interesting explanation of the stock market drop, and his last paragraph also makes a good point. So here it is.

 

1.      If I may…

“Hardly anyone is using the word “crash” because it brings back the specter of the 1929 crash, but when the market plunges more than 700 points, the largest drop in history, the term does come to mind.”

The numbers are a bit deceiving because while a 777 point is indeed the biggest POINT drop in history, it is far from the largest percentage of total market volume drop. In truth, the crash of 1929 was far larger in scale to the actual size of the market at the time, than yesterday’s fall. In other words, 10 cents off of 1 dollar is ten percent, but even 70 cents off of 100 dollars is but seven tenths of one percent.

Another noteworthy item would be that the markets have rebounded somewhat today… closing up almost 500 points (CBS News), even without $700 billion US taxpayer dollars.

The outcome is going to be tough either way but, we only have ourselves to blame if we bankrupt the nation trying to save those institutions that, basically, created the mess to begin with.

Personally, I’d rather see the money go to the consumer and those in peril of losing their homes, than to hand it over to those who held out the rotten carrot.

 

Inaction by Congress Puts the U.S. in Grave Economic Peril

September 30, 2008

  Only two members of the Georgia members of Congress voted for the bailout for investment banks. They were Rep. Sanford Bishop of Albany and Representative Jim Marshall of Macon, both moderate Democrats.

  Both of Georgia‘s Republican senators, Johnny Isakson and Saxby Chambliss, were not happy about the vote.

  According to Atlanta Business Chronicle, Chambliss said, “The House vote today puts everything in a state of uncertainty and complicates the issue of whether or not the Senate will vote on a financial rescue plan,”

  And Isakson said, “Our country is struggling. Doing nothing is unacceptable. I hope cooler heads will come to the table so we can move forward with a proposal that is in the best interests of the American people.”

  Though it is a hard pill to swallow, using $700 billion tax dollars to buy bad mortgages to bail out Wall Street investment banks, not to do something will be disastrous. Hardly anyone is using the word “crash” because it brings back the specter of the 1929 crash, but when the market plunges more than 700 points, the largest drop in history, the term does come to mind.

  Congress is to reconvene Thursday. Let’s hope the plan presented then will have enough protection in it for the American taxpayer, including homeowners with mortgages that it can get enough support to pass.  To let election year political considerations take priority over saving this country from financial disaster is about as low as a member of Congress can get.

 

Barnes Effort to Prevent this Financial Crisis was Overturned by Sonny Perdue

September 29, 2008

  Former Governor Roy Barnes saw this financial debacle coming and had the Georgia legislature pass a law to prevent it happening in Georgia. It held lenders accountable for their lending policies. Bill Shipp reports that K Street lobbyists in Washington tried to get Barnes not to do it, but they failed. In order to stop what Barnes was doing because it could have spread to other states, Wall Street bankers and K Street lobbyists poured money into the Sonny Perdue campaign. Once Perdue won the election, he saw that the Barnes’ law was dismantled.

  You can get the details by reading Shipp’s column. Just click on this link.

Why No Bailout for Bill Heard Chevrolet?

September 28, 2008

  The government’s bailout of the banking industry raises some interesting questions. The biggest one is where does it all end? If we grant 700-billion-dollars to bailout the Wall Street investment banks, and 25-billion-dollars to save American car makers, why shouldn’t we bailout Bill Heard Chevrolet?

  After all, all Mr. Big Volume was doing is the same thing that the mega-banks were doing. As an Atlanta Journal-Constitution story says, “Like the Wall Street investment bankers who grabbed up securities backed by risky subprime home mortgages, Heard apparently staked too much on people who couldn’t pay what they owed.”

  Another interesting question is where does this bailout business end?  And what is the lesson it sends?  Is it that risk is taken out of doing business because the taxpayer will make up the difference when the business fails?

  Don’t be ridiculous, you might say, the government can’t do that for everybody. In that case, is it fair to do it for some and not others, and who decides which ones are insured against failure by the taxpayer?  And that tax payer, by the way, will be our children, grandchildren, great-grandchildren and their children, because the government will raise the money not by raising taxes now, but by borrowing it from China and other countries willing to take the risk.  The only alternative to that, if taxes are not raised, is for the government to print money. That causes runaway inflation which is another disaster.  

  What a mess.

  Just look at what the successful deregulators have done. They have put us right back where we were in 1929 when the stock market crashed and the Great Depression followed.  As the 60’s anti-war protest song went, “When will they ever learn? When will they ever learn?”

 

 

Wall Street’s Financial Earthquake Shakes All of Us

September 24, 2008

  Now I am beginning to really understand why people who have experienced an earthquake say, “It’s terrifying because you have absolutely no control over the situation.” It appears the only thing you can do is crawl under a desk or table or something and hope nothing strong enough to crush it falls on it. 

  That’s the way I am feeling about what’s happening on Wall Street and in Washington. Taxpayers are about to be saddled with $700 billion plus to bail out financial institutions. There is nothing I can do about it as I watch it being railroaded speedily through Congress.

  Though this blog is mainly locally oriented, I have to talk about this mess. It is local in that it effects everyone in this area. It has me very frustrated and angry.

  You and I are having to pay for the insane greed on Wall Street and almost eight years of deregulation in Washington that brought about this disaster.

  The original Bush administration’s bill prevents any court review of anything the Treasury Department does after the $700 billion is handed over to them.  Thankfully some members of Congress, Republicans and Democrats, are throwing up red flags on this one.

Rep. Dennis Kucinich (Dem. OH)

Rep. Dennis Kucinich (Dem. OH)

  I like Rep. Dennis Kucinich’s idea.

 “Since the bailout will cost each and every American about $2,300, tomorrow I will offer legislation to create a United States Mutual Trust Fund, which will take control of $700 billion in stock assets, at market value and not higher, convert those assets to shares, and distribute $2,300 worth of shares to new individual savings accounts in the name of each and every American,” Kucinich said in a statement that was published on the Truthout site.

  It went on to say, “The Wall Street financial disaster is an opportunity to create a genuine ownership society. If Congress invests $700 billion in the market, then the American people must get something of real value for their investment.”

   And why not? If we are being asked to put up $700 billion dollars, why shouldn’t we get something for our money. It won’t happen though. The Bush administration won’t even go along with the idea of including a stipulation in the bill that would prohibit the reckless CEO’s who are largely responsible for this debacle from getting multi-million dollar golden parachutes. In other words, they’ll get millions while others suffer from their actions.

  Yes, the financial earth is shaking, and there is nothing I can do about it but look for something to get under to prevent from being  hit by falling Wall Street debris.  My only hope is that Congress will provide that shelter.