Wednesday, March 18, 2009

These are not Bailouts; They are Loans or Purchases

We need different terminology. To me a "bailout" is a gift. I'm sunk in credit card debt, I go to my folks, ask them to bail me out. And they do. At no cost to me. That's a bailout.

That's not what we've done with any of these companies. We've loaned them money on which they must pay interest or dividends. The Fed has acquired assets, in lieu of cash, which they can sell later on when the markets have recovered. We acquired equity via preferred or common stock.

Whether or not you agree with the original decisions, we are now committed and our only objective should be to ensure that these investments, unlike those in our 401Ks, actually generate a profit or, at worst, make us whole some years down the road.

Please remember Chrysler way back when. That loan, too, was widely criticized, but Chrysler paid the load back early and in full and at a profit to the taxpayers. So it has been done before. Not on this scale, of course, but it can succeed.

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