There are many reasons jobs have not returned to our economy, let me give you one that also highlights the disconnect between socialist liberals and capitalist conservatives, it involves bank fees and bailouts.
When TARP was first proposed our leaders all but guaranteed we would see our money returned. Some also suggested the American people would be rewarded with a return on investment! Actually the New York Times touted we already had started rolling in the dough. (Their only caveat? Oh yeah,”American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and” our other bailouts “the automakers General Motors and Chrysler” but that is splitting hairs, really)
Yes, some of the financial institutions have repaid bailout money with interest, giving the impression the plan worked and the banks were saved. One could just assume new business had been found and the world was right again! What really happened and what is occurring across the entire financial system, is that consumers are paying higher fees and higher interest on the accounts they already have! (Want stock, or assets, they have fees for those too, more on that in a minute!)
How did companies like CITI pay off their government loans?
Let me break the process down:
Step 1) Fired lots of people
Step 2) Sold lots of assets
Step 3) Raised the cost of services by charging fees
Step 4) Watched their stock price go up
Step 5) Attached some fees for preferred stock sales (The kind of stock the gov was given)
Step 6) Borrowed money from FED at a very low interest rate (They did this before the collapse too)
Step 7) Raised the interest rates on consumers to a very high level
Step 8) Troubled assets? What troubled assets? They pretty much ignored them because the Gov will always be there to help
Step 9) Repaid the loans
It gets better!
Step 10) Government releases preferred shares for sale so Gov can profit!
Step 11) Would try and buy back own preferred stock for less than it was worth. When government wouldn’t take, they have just been waiting them out
Step 12) Charged a fee for the sale of the stock the Gov released
Step 13) CHARGED THEMSELVES that fee
Step 14) Claimed those fees as revenue and will pay all their top people bonuses on said revenue and be sure NOT to hire anyone back
Step 15) Just for the heck of it, they started charging even higher interest rates and fees. What will people do? Go to another financial?
The consumer and the worker ultimately pay the price when government becomes intwined with business. Workers are downsized or face steep pay cuts while consumers have the new cost of business passed onto them with a rise in the price of goods and services. Each feed the other; less people consuming results in more job losses, leads to further loss of consumption, then even more job loss.
The “Law of Unintended Consequences” always applies to government endeavors. Every solution creates more problems.
When government first proposed that TARP funds would be returned with interest, they explained taxpayers would buy bad assets to clean up the books of the financials. This made almost no sense, what would taxpayers want with bad assets? It made no sense for financials either, how did they really know which assets were “troubled” and what if the “troubled” assets actually turned out to be worth something later on?
So plan two was for government to take ownership of stock. Government owning stock gave an almost seal of approval for other potential buyers. The same kind of seal that came with government giving the perception that it would bail out mortgages. This lead to financials buying other financials, especially Chinese, that helped raise the stock price. See how this works?
Financials haven’t found new business, they haven’t originated new loans, they haven’t truly resolved what to do with troubled assets, they haven’t changed their behavior. They just raised their stock price utilizing the same bad business practices that lead them to ruin in the first place. The consumer and the taxpayer paid an enormous amount of money to lose their jobs and pay more fees.
The citizen is the consumer and the employee. We can no longer pretend that there is some cabal of “rich” we can tax or nickel and dime, we are only punishing ourselves. When the government took ownership of financial institutions it guaranteed the American people an actual investment in something we little understood. We have now created a system where “too big to fail” is literal. If the financials go under, we lose our investment. The only way to either regain or profit from our investment is to raise the cost of doing business on ourselves.
We had to accept major layoffs for the financials to survive. We have to pay enormous fees in order to pay ourselves back the money we leant. We need the financials to raise their stock price in order to make money on our investment. We own these financials and the only way for the collective to profit is for the collective to go bankrupt.
This relationship is not incestuous but cannibalistic. We are eating our own bodies, consuming our own fat to survive and worse, accelerating the process to feed our own unquenching hunger for what we perceive as “fairness” and “justice” and “security.”
This entire process has been furthered by terrible legislation like Sarbanes Oxley passed under the guise of protection and security for consumers and workers. SOX contained new accounting rules for investment that are so strict, it has killed investment within the United States. The government is guaranteeing more involvement in tax preparation this year and demanding further accountability as it chases the boogeyman of corporate greed. A large percentage of the public and most of our government actually demand the actions that result in rising unemployment. The crusade will further raise the cost of doing business and further the cycle of job losses and rising prices. It will also further kill innovation and guarantee foreign investment at the expense of domestic growth.
I was against TARP and the bailouts from the moment I understood what they were, giving the money of all to some, specifically the people who helped create this terrible system in the first place.
Personally I want financials to succeed but I understood then, as I know now, that capitalism must be allowed to prevail. That means letting the weak die. TARP is not capitalism, it isn’t even socialism. The economic system it most closely aligns itself to is fascism. Government doesn’t want to run the means of production in our current system, it simply seeks to control every aspect of it and make decisions from afar. The difference between our own economic system and those of true fascist states in the past is we have no one to loot but ourselves to sustain our way of life. We are trying to sustain ourselves by eating ourselves and wondering why things are falling apart.
Placing new fees and taxes on financials sounds like a common sense and fair solution for returning taxpayer money. The problem is, these fees will not be paid by some outside entity separate from the public. We are placing these fees on ourselves, at the expense of ourselves, with the belief that they are being levied on someone else. Small business will pay for these fees, individual account holders will pay for these fees, large corporations will pay for these fees and eventually customers will leave these institutions in favor of foreign financials making our investments worthless.
It will, for a very short time, seem like we are doing something just. That is morw important in an election year than actual achievement.
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