SHARE THIS SHOW:
RELATED CONVERSATIONS:
RECENTLY ON TOL:
The TOL Blog
TAGS:
$200 Billion Bucks
Tuesday morning, President Obama is scheduled to give a speech about the economy. He talks on the heels of good news: Today, the government says it will be losing much less bailing out banks than experts thought just a few months ago.
A couple hundred billion dollars less, as a matter of fact. The president says the money could go to small business loans, job creation, or straight to paying down the federal deficit. It's a hot debate: At least one influential Republican who helped negotiate the bank bailout says may even be illegal to use TARP savings elsewhere. Others say spending those savings on jobs could help the stimulus package — a separate program — where it fell short.
Does TARP's better bottom line represent a found money boon that should be available for more lending? Or the end of a program that performed as it was supposed to?
As for the stimulus package, if that money fell short, where and how?
The country's biggest single recipient is Washington's Hanford Nuclear Reservation, where reportedly it's helping pick up the pace of cleanup. Another federal program to improve the economy by lowering the number of foreclosed homes is just getting underway in parts of Oregon. But some reports say stimulus money still isn't going where it's needed.
We've checked in on this periodically — soon after passage, a few months later, and at the end of the summer. How, at this point, is federal spending to boost the economy affecting you? What do you think should be done with the "savings" of the bank bailout?
GUESTS:
- David Cho: Financial Reporter for The Washington Post
- Chadwick Matlin: Staff reporter for Slate's The Big Money
- Rolfe Winkler: Columnist for Reuters
- Chandra Brown: Vice President of Oregon Iron Works and member of the Oregon Innovation Council
- Pratik Joshi: Staff reporter for the Tri-City Herald
- Victor Merced: Director of the Oregon Housing and Community Services Department
Tagged as: bailout · obama · stimulus
Photo credit: J0nB0n / Creative Commons
-
I can attribute much of the current "surprise" about the financial results of the TARP/bank bailout program to the sense that the initial $700 Billion was a gift or grant to banks, when it was in reality a loan, or at least preferred stock purchased by the Federal government. The term "bailout" was slapped onto the program very early in the discussion and I think the public perceived the government as being much more financially generous that it actually was.
It's important to differentiate between "TARP funds" which were basically loans, and "stimulus funds" which are outright goverment spending.
While the incursion of goverment into financial markets and the economy in the last year was very significant and broad, the confusion between "gifts" and "loans" only made it seem more drastic than it really was.
-
what's happening is not a financial crisis, or a housing crisis, or even an employment crisis. This is a greed crisis. The resources are still there, and the will of workers is still there. Throwing money at the the symptoms, will not change the outcome.
The solution, wouldn't cost a thing. Tie executive compensation to a fixed multiple of median employee wage. It's really that simple. The reason that the TARP funds are coming back, is because it limits executive compensation. If our employees health is tied to the financial elite's fortunes, you'd be surprised how fast things would turn around.
-
It was a problem of greed, but executive compensation has always seemed like a red herring to me.
I don't know how it is good business to pay a CEO $400M to drive the company into the ground. Seems like eventually that would work out on it's own.
The real problem is that we had a problem with combined banks and investment houses, we put regulations in place to make sure they could not combine, and then we removed those regulations.
If those regulations had still been in place, it would have been much harder, if at all possible, to securitize mortgages.
-
Executive compensation, is only a red herring, because of lack of political will.
The banking, investment house issues relate to endless greed.
by tying executive compensation to the health & welfare of their employees, that provides incentive, to pay living wages, and look out for the employees, in the same way that the employees have looked out for the welfare of the company.
-
Right, but there is no way to logically limit executive compensation. The government can't just say: "No CEO will make more than $500k." It doesn't make any sense the limit will always be arbitrary.
The point is to set regulations so that there are no "too big to fail" companies to severely limit the impact of bad decisions.
From there, if a company wants to pay their CEO $400M to make bad decisions, we can let that company fail and say: "See, now wasn't that stupid?"
Executive compensation limits are just a populist thing. In a properly working market, CEO would receive rationale compensation. In fact, the best, most solid companies running right now pay their CEOs relatively little. So, that problem is already being taken care of.
-
The issue is, that much of executive compensation comes at the expense of employees. Lay off 300, get an extra 40m. It causes a race to the bottom, during which, a vast majority of the society loses.
It's completely possible to limit executive compensation. Just tax them right into the same poor house that their laid off workers are forced into. Political will, is the problem, not logistics. California was planning on levying a heavy tax on walmart, for having so many part-time, unbenefitted workers. It just takes the will to overcome the corporate control of our government.
-
It's ridiculous to say that we have $200Billion extra - no, we just didn't spend as much as planned, meaning that we won't have to borrow as much from places like China if we don't spend that $200Billion.
We shouldn't borrow more money we don't have.
-
I am astounded that there are so many experts in this country. I go to a doctor when ill, a mechanic when the car breaks. I elect leaders who know how to lead, and judge them individually as to their management abilities, and then defer to their judgment -except in matters of conscience. Then, if the results are bad, vote them out and a new philosophy in.
Ideas take the whole hearted effort of a united body in order to give them a real chance to work. If we elect officials, then don't let them use OUR whole effort behind them, we don't really give their ideas a chance to work. We can't honestly say we don't like the results of his/her governance, because we didn't give it a fair chance.
-
Some of us would rather not be sheep. But if you'd like to be that's fine.
-
The best thing that could happen to the consumer is they would NEVER see credit again!
-
Indeed. The "consumer" is tapped out. They've over consumed. Now is the time for them to learn to live within their means and rebuild savings.
BTW: I hate to be referred to as a "consumer" - I'm a citizen and my purpose is not just to consume things.
-
Yeah, everyone should have to buy a house or car in cash. That would work great.
Or maybe we could just do what Georgia did and institute K-12 personal finance education so that kids grow up learning how to use credit wisely.
-
"Yeah, everyone should have to buy a house or car in cash. That would work great."
@slakr007: What's the problem with paying cash for a car? Many of us do that. We buy used cars and drive them till they're dead. I've had my current car for almost 23 years now. My wife's we bought used in 1999 and it's still going. If I need to replace one I'll buy another used car with cash and drive it into the ground.
As far as paying cash for houses go: What if you suddenly had to pay cash for houses because loans weren't available? I'd guess that home prices would eventually be affordable again because there would be a lot less money chasing houses - prices would fall rapidly. We need home prices to go down so that we can adjust to the new normal for the American worker - lower wages due to global wage arbitrage. The best thing that could happen for most workers would be lower home prices because it would mean that less of their income would go towards housing.
-
As far as paying cash for houses go: What if you suddenly had to pay cash for houses because loans weren't available? I'd guess that home prices would eventually be affordable again because there would be a lot less money chasing houses - prices would fall rapidly.
No, they would not fall. Houses and land have actual worth. There are very few people that can buy a modest house at cost without a loan. And that does not even count the cost of labor to build the house and the ever increasing cost of land.
It's not like there is some cabal of people that just decides the price of houses and they are running up the price because of the availability of credit.
As far as cars go... Why shouldn't I be able to buy a $40,000 car with a loan? I can afford the payment and still run a surplus into savings. It is far more convenient than saving up $40,000 to buy the car and for that convenience I pay interest. Why shouldn't that option be available to me?
No, it certainly is not the most practical option. But, I can do it and I can do it without tapping out my credit.
-
"No, they would not fall. Houses and land have actual worth."
@slakr: nobody's saying they don't. But it's a matter of supply and demand. If suddenly there were no possible buyers at $200K (because there was suddenly very little access to loans of that amount) then prices would fall. They'd have to. The value would still be there, but the price in dollars would adjust.
"It's not like there is some cabal of people that just decides the price of houses and they are running up the price because of the availability of credit."
Who says there's a cabal? Again, do the thought experiment. Pretend there's no loans for houses. What does that do to demand at current prices? How about if you require 20% down (as has been the case in the past)? That certainly moderates demand because it takes some number of years for the buyer to save up the down payment.
"As far as cars go... Why shouldn't I be able to buy a $40,000 car with a loan? I can afford the payment and still run a surplus into savings. It is far more convenient than saving up $40,000 to buy the car and for that convenience I pay interest. Why shouldn't that option be available to me?"
Are you feeling entitled to the loan? Getting the banks to loan again would actually not be a good thing at this point. It's like more booze for the drunk to prevent the DTs.
This is off topic, but if you want to waste you money that way, well then so be it ( you lose big on the depreciation of the car in the first year or two and you lose by paying all that interest) But you would be a lot better off financially to pay cash for a solid used car and use all that savings to help fund your retirement or perhaps to prepare for long bouts of unemployment in your 50s... Our standard of living was already falling before this financial crisis hit. That fall has now accelerated. Best to be frugal and prepare.
-
We cannot continue to expect to borrow money indefinately. Currently the debt load per person is $39,365.44. Clearly this is not sustainable and we need to head back to at least zero deficit spending if not beginning to pay that back.
-
Since the banks aren't making loans, I think that the $200 Billion should be used to loan to small business or homeowners with good credit who can't get a loan.
The bigger issue is that we should be looking at how to stimulate employment with the cost to be distributed into the future. One way would be to have an employment tax credit such that for every employee hired beyond a certain date (e.g. November 1st, 2009) and who is still hired in 5 years, the employer would get a rebate of the 1/2 of the employer portion of the payroll tax in 5 years. Another possibilty would to condition the investment tax credit to only apply to capital goods at least half of whose content would be made in the USA, - again with some of the credit to be paid in the future.
-
I'm a cynic. It wasn't a problem for eight years to get us into a horiffic deficit starting from no deficit, but NOW we must deal with it immediately. It tells me that the people upset are mostly upset that we are no longer spending the money in ways that benefit THEM or things they care about.
I don't see why it has to be either or. We need people to work and we need to save and spend responsibly, both as individuals and as a nation, and I appreciate that the president is talking about both.
-
Yeah, agreed. Memories are short.
-
Yeah, the Republicans spent like drunken sailors during the Bush admin.... that doesn't mean that we can continue the irresponsibilty forever.
-
@skeptictank
That's the rub, it is not necessarily irresponsible to spend this money, but it seems very irresponsible when we ran up an insane deficit on unnecessary things like Iraq.
I mean, that's like saying it is irresponsible to use your credit card to buy gas to get to work because you have to pay down the debt on your brand new 60" LED HD TV.
-
slakr: eventually the money has to be paid back. If not, we default. Where does the money come from to pay down the debt eventually? Higher taxes. On everyone. Which will dampen economic growth. And we'll have much higher interest rates if we continue on this path, which is again a drag on growth. There's no free lunch. We either pay the piper now, or pay later and make things even worse.
The problem we have now is that future incomes will likely continue to be either stagnant or even lower than they are now as our standard of living falls to meet the rising standard of living of places like China and India - in a global freemarket system for labor such as we have now, labor prices seek their lowest level. Our incomes are falling due to outsourcing while theirs are rising. So in the future we likely won't have the incomes to support deficits at this level - at some point we will not be able to service the debt. Then things get very dire for us.
-
@skeptictank
Yes, eventually the money has to be paid back. But, the question is whether not borrowing $200B (thus not increasing the debt by $200B) is better than attempting to borrow and invest that $200B to create more solid, continuous revenue to pay down the debt through more jobs (and thus increased tax revenue).
That was the point of my analogy was that it obviously makes more sense to borrow money to buy gas to get to work. Otherwise, you are never going to pay down the debt on the TV even though you kind of paid back $40 on the TV.
Our debt is more a function of our status as THE super power and our unwillingness to cooperate. It might do us well to go ahead and let China be the new super power and stop spending money on invading countries. I would see that as an increase in standard of living.
-
This seems so bizarre to me. There was very little question that we had to "loan" all of this money to banks. They are not giving out loans, they are now turning insane profits, and now we are having a discussion about spending a fraction of the original loans to at least attempt to create jobs or give loans to small businesses like it is a detestable option.
-
I love it when people bring up Japan and how they don't want "that kind of economy for their kids."
The Japanese live quite well and are not obsessed with trying to maintain a continuously growing economy.
It would be great to know if people that deride Japan's economy have ever spent any time in Japan.
-
Japan engaged in a huge amount of deficit "stimulus" spending all throughout the 90's and it continues now... and didn't get them out of their recession. In fact now Japan is back into deflation and they plan another stimulus plan. Their national debt is now well over 200% of GDP - their borrowing cannot continue forever.
Also, you have to remember that the Japanese are savers. This is what has allowed them to run these kinds of deficits for so long because they are able to fund the vast majority of their deficit spending from within. The US, on the otherhand, has not been a nation of savers for a good 25 years. Our people have a huge amount of debt and a large portion of incomes go to service that debt. So the Japanese actually had the advantage of savings going into their downturn in the early 90's. The US does not have that advantage - we must go hat in hand to places like China and Saudi Arabia to borrow money to fund our deficits.
-
The transparency of stimulus tracking has offered the community an opportunity to see where our money is going. The East Portland Action Plan fully supports the Mayor of Portland in his efforts to extend this practice to all bureau spending, so that we have the same level of oversight that allowed the EPAP to acknowledge the need to equitably distribute funds/improvements/public resources throughout all of Portland's districts.
-
I believe that any surplus TARP funds should be distributed to the struggling working class & unemployed in the form of a tax rebate. This would stimulate demand & therefore jobs, and may help keep some from losing their homes.
-
So basically you want to borrow money from China so people will go out and buy Chinese products? How is that a good economic plan for the US? That's essentially what Bush did in 2008 (and earlier in 2003).
-
BTW, if the deficit is so overwhelming that it MUST be paid down immediately above all other considerations, how dare the same people talk about reducing taxes anywhere for any reason? In fact they should be talking about RAISING taxes to pay the deficit.
-
Conservatives would argue that lowering taxes always increases revenue. Nevermind that, by that logic, lowering taxes to zero would mean infinite revenue.
But, really, there is some logic to lowering taxes to increase revenue. It just has to be targeted and logical. For instance, lowering taxes on the upper 1% does not increase revenue despite the insistence of trickle-down people. But lowering taxes and providing incentive for reinvestment in small businesses can increase revenue.
Likewise, you could remove every single deduction from income taxes and significantly lower the income tax rate and still maintain the same revenue level and more because the administrative overhead of the IRS and preparing tax returns would disappear. ...much more simple and logical than "Fair Tax".
-
I agree with you. And I want the $200B to go towards reducing the deficit (actually, I don't want that $200B borrowed in the first place - I think that's a more accurate way to put it). But you're right, we can't reduce taxes at this point either - in fact a lot of taxes will likely have to go up especially on higher incomes.
-
What would happen if we took that money and invested it somewhere to assure we have the forward thinking leaders we need to assure this kind of crisis doesn't happen again?
Our education systems are in a dire position. Underfunded mandates continue to drive unacceptable teacher attrition rates and drop out rates. We need an investment in innovative, creative education practices so that our children have a chance at influencing their future. We need to educate the Whole Child, including rigorous academics, the arts, physical education, healthy food and safe schools.
Let's use the money where it will have the most long-term impact.
-
these are huge and complicated questions that do not lend themselves to simple "all or nothing," "this or that" solutions. but here's a thought:
if i am deep in credit card debt & can't keep up and i come into unexpected spending power (even if it's a loan) - what's the best way for me to spend that? i could, of course, just send it right to my creditors. maybe i could buy a couple nice suits to wear for job interviews, or take some classes or get some help with resume & interviewng skils, in hopes of increasing my income. maybe i can get some work done on my furnace that will head off having to replace it soon at much greater expense.
most likely my best strategy is going to be some carefully considered combination of various options. likewise, i'm not wedded to one approach or another with the returning TARP money - i just want them to honestly look at the possible options and make the best decisions they can. of course it's much more likely it will be decided by what postures they think will be most politically advantageous.
-
Why on earth are these programs encouraging the building of more housing? We still have an oversupply.
-
What savings? It's not savings because it was loan program and any funds paid back should be used to retire the debt, when this program was created.
-
Should the existing failed system be saved?
-
I certainly am not an expert on the pros and cons of whether we need a stimulus package. I understand the need for investment to jump start the economy. I also understand the need to live within our budgets.
Having said that, as the co-chair of the East Portland Action Plan, I want to continue to encourage the city of Portland to take seriously the need for investment in East Portland. Almost a quarter of the residents live in East Portland, yet because of more recent annexation we are sorely lacking in basic infrastructure to build the kind of quality of life much of Portland takes for granted.
While East Portland received it's fair share of the stimulus for projects that include city wide services, East Portland seemed to get passed over when it came to discretionary spending within the stimulus. The mayor has committed to better tracking of the issue of equity across Portland and we support his efforts to do so.
-
We had witnessed how the Obama administration became so eager to save the ailing economy of US from economic stimulus program down to job creation. He tried his best to recoup and refinance those companies, which are about to collapse. Anyone here knew the history of credit card? We all have to navigate the Byzantine labyrinth of credit cards at some point. Although at this point, they seem to be leaning just this side of pure evil, credit card history is actually kind of interesting. Up until the 1950s, any and all credit was specific to only one store – the grocery store, clothing store, etc. There were no payday loans; pretty much it was store credit and pawn shops. The Diner's Club Card, and the Bankamericard, later to be VISA and MasterCARD, all came about by businesses grouping together and sharing credit with customers.
-
Comments are now closed.
The American Recovery and Reinvestment Act is investing billions of dollars through cities and other governments, a necessary step to lift the country out of the worst economic crisis since the Great Depression.
The East Portland Action Plan Committee has noted that the neighborhoods east of 82nd Avenue are not getting their fair share of the city’s proposed federal stimulus investments. According to the city Auditor, there is a sizable gap between East Portland and the other districts of the city in service levels of all kinds and overall resident satisfaction. Our neighborhoods lack basic amenities such as sidewalks, parks and community centers. East Portland has the highest rates of foreclosure, unemployment and poverty in the city. Investments are needed to provide adequate affordable housing, schools and family wage jobs.
East Portland deserves at least a fair share of all kinds of public investments, including the stimulus.