Sunday, November 09, 2008

Problems with the bailout

Excerpted from the Courant:

Problem #1:

Webster Financial Corp. said Friday that it has received preliminary approval for $400 million of new capital from the U.S. Treasury's assistance program and will use it to increase lending and fuel growth — possibly including acquisitions.

So our tax dollars are being used to buy equity stakes in private businesses, effectively nationalizing the financial services industry in part. Great - Hugo Chavez would be proud. And these banks acknowledge they may not even use the money for the intended purpose.

The article continues:

Problem #2:

Webster is well capitalized without the infusion, Smith said. But the company decided to take the capital because the Treasury is encouraging healthy banks to accept the boost to increase lending, and "in a challenging environment such as we're in today, you can't have too much capital," he said.

So the Treasury is openly encouraging people to continue borrowing and spending. Henry Paulson, Ben Bernanke and President George Bush are behaving in a reckless and completely irresponsible manner. They're basically saying that the problem is our credit card limits are too low.

I wish President-elect Barack Obama the best of luck. And I hope he heeds Congressman Ron Paul's advice.

Paul equated the bailout of the banks to giving a drug addict another fix. Yes, the addict will feel great for a short time, but you're not addressing the underlying problem.

If Washington insists that money does grow on trees, who will have confidence in the dollar in the long run? The economy will only get worse.

Tim White

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