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Title: George W. Bush: Bailout Call 'Wasn't That Hard'
Source:
POLITICO
URL Source: http://www.politico.com/news/stories/1010/43883.html
Published: Oct 20, 2010
Author: ANDY BARR
Post Date: 2010-10-20 13:41:34 by Brian S
Keywords: None
Views: 22572
Comments: 41
Former President George W. Bush on Tuesday night defended his decision to bail out banks toward the end of his term, saying the call “wasn’t that hard.” “I made the decision to use your money to prevent the collapse from happening,” Bush said during a speech in Tyler, Texas, according to reports from The Associated Press and other outlets. Bush said that when the markets crashed in the fall of 2008, he recognized that if his administration didn’t do “something significant,” a “depression greater than the Great Depression” could occur. The former president said the choice to backstop many of the country’s leading financial institutions “wasn’t that hard for me.” "Here's what you learn," Bush said of his time as president. "You realize you're not it. You're a part of something bigger than yourself."
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#1. To: Brian S (#0)
Bush made the right decision here.
I completely disagree. First, it is a good thing when poorly run businesses go out of business because it allows their resources to be freed up for more productive uses. Second, over the last two decades, too many of the best and brightest Americans have chosen careers on Wall Street over science and engineering because of the big money involved. Someone with a masters degree in math from a top university who goes to work for HP or IBM creating products might make $80K out of school. As a "quant" on Wall Street, they could make $400k modeling derivatives and other crazy investment instruments. The bailout enabled these failed companies to continue to throw money at these people, as well as at their failed executives, to the detriment of the rest of the economy. Third, the savings of average people were not a risk because FDIC insurance covers $100K per account. The Japanese refused to restructure their banks when faced with a similar crisis in the early 90s. Now, the once mighty Japanese economy has been basically in a rolling recession for 20 years. It's hard for me to find even one thing that Bush did right, other than his two Supreme Court nominees. The TARP was one of the worst things he did.
First, it is a good thing when poorly run businesses go out of business because it allows their resources to be freed up for more productive uses. The alternative to Bush acting was a complete melt-down of the global financial system. I think he took the correct immediate approach in stabilizing the system, but longer term nationalizing failing backs, re-capitalizing them, and splitting them out into smaller entities banks as Roubini recommended rather than build bigger banks was arguably the correct approach. The economy is never going to turn around until we get a banking system that isn't weighed down by bad mortgage debt.
I really don't see it that way. Sure, their may have been a deeper short term pain, but the economy would have recovered faster. Look at the difference between the depression 1920-21 and the Great Depression. The Depression of 1920-21 was very deep. Production fell by 6.9% and prices fell by 18% (the worst deflation in U.S. history). But it was over quickly because the government allowed the market to flush inefficient companies and recover. The Great Depression lasted 12 years because Hoover and then Roosevelt kept mucking around with the economy, imposing tariffs, taxes, regulations, new programs with massive spending, etc. Bush should have let these companies enter Chapter 11 and work out their issues in bankruptcy court. This is why we have Chapter 11.
#8. To: jwpegler (#7)
The Great Depression lasted 12 years because Hoover and then Roosevelt kept mucking around with the economy, imposing tariffs, taxes, regulations, new programs with massive spending, etc. I think they were very different beasts. If you go back and study the 1929 crash and depression, you'll see that like 2008, the financial system was collapsing. Note that in most states banks were already shuttered the day Roosevelt took office. His action of closing the banks was symbolic at best. By that point there was already talk of states returning to their own script because federal currency was worthless.
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#4. To: go65 (#1)
(Edited)
Bush made the right decision here.
#6. To: jwpegler (#4)
I completely disagree.
#7. To: go65 (#6)
(Edited)
The alternative to Bush acting was a complete melt-down of the global financial system.
Replies to Comment # 7. The Depression of 1920-21 was very deep. Production fell by 6.9% and prices fell by 18% (the worst deflation in U.S. history). But it was over quickly because the government allowed the market to flush inefficient companies and recover.
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