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Bernanke Admits Bailout is NOT Aimed at Helping Taxpayers

George Washington’s Blog
Wednesday, Sept 24, 2008

Apologists for the bailout plan say that it will have a trickle-down benefit for taxpayers.

But in his testimony to the Senate today, Bernanke pretty much admitted that the bailout isn’t aimed at helping taxpayers.

Specifically, as the Wall Street Journal summarizes it:

Bernanke used his time to argue for not buying assets at fire-sale prices in the Treasury’s $700 billion bailout proposal.

***Mr. Bernanke said the Treasury plan should have taxpayers buy the assets and hold them at close to their maturity value. Removing the assets, he said, would bring liquidity back to markets, unfreeze credit markets, reduce uncertainty and allow banks to attract private capital. (Reuters has a partial transcript)

(Article continues below)

Forcing assets down to even lower fire-sale prices would protect taxpayers the most, since the government would own the assets below the value if held to maturity. As long as those securities didn’t flat-out default, the government’s purchase would have a substantial upside. However, Mr. Bernanke essentially argued that doing so would hurt markets even further and wouldn’t solve the problem facing the economy. In pushing back against congressional efforts to change the Treasury proposal, Mr. Bernanke said: “We cannot impose punitive measures on institutions that choose to sell assets.” The beneficiaries would be not just the companies selling, but markets and the overall economy, he said.

Still, he acknowledged that the precise approach to doing so hadn’t been determined, arguing for flexibility. “We do not know exactly what the best design is,” and that would come from consultation with experts, Mr. Bernanke said.

“We believe that strong and timely action is urgently needed to stabilize our markets and our economy,” he said.

In subsequent questioning, Mr. Bernanke distinguished between, on the one hand, “fire sale prices,” the ones that prevail “when you sell into an illiquid market” and, on the other, the prices that holders think the assets are really worth, sometimes described as “fundamental” values or “hold-to-maturity” value.

“The holders have a view of what they think it’s worth. It’s hard for outsiders to know,” Mr. Bernanke said. The point of an auction is to reveal those prices.

So Bernanke is arguing against the government purchasing Wall Street’s toxic assets at their real price (which would benefit taxpayers) and for the Wall Street firms themselves to set whatever arbitrary price they like, since they “have a view of what they think it’s worth” and “it’s hard for outsiders to know”.

Further proof of the fact that the bailout is not aimed at helping taxpayers is that even very wealthy, solvent Wall Street (and foreign) firms may get bailout money. See this.

Research related articles:

  1. Bloomberg Analyst: $700 Billion Bailout Could Balloon to $5 Trillion
  2. House GOP: We’ll Oppose Any Bailout of Wall Street
  3. A Breathtaking Insult to the Constitution: Bail Out on This Bailout
  4. U.S. Taxpayers Are Paying to Bail Out FOREIGN Speculators
  5. Under Proposed Bailout, Feds Could Speculate, Nationalize Any Company or Industry, Or Do Anything Else They Want Using Taxpayer Money
  6. The Paulson-Bernanke Bank Bailout Plan
  7. NO To The Paulson-Bernanke Derivatives Scam Bailout
  8. Bernanke, Paulson Pressed to Seek Big-Government Bank Bailout
  9. How Will the Bailout Work? No One Actually Knows
  10. Veterans of ’90s Bank Bailout See Opportunity in Current One
  11. Bernanke: Rate Cut Possible to Cure ‘Historic’ Slump
  12. Bernanke Signals Fed Still Open To More Rate Cuts


 

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10 Responses to “Bernanke Admits Bailout is NOT Aimed at Helping Taxpayers”

  1. SeaBottomDweller Says:
    September 24th, 2008 at 4:36 am

    Surprised much…?

    But keep in mind…

    In order to bail-out ANYONE you would need money to spent not to lent…

    What part of HUMONGOUS DEBT is not understood?

    “Trickle down” and “Spending your way out of trouble” have and will never work…

  2. t Says:
    September 24th, 2008 at 5:03 am

    Bernanke “it’s hard for outsiders to know”… what this $hit is worth. We know Ben… We know your not a $10.00 turd your realy a $5.00 turd in disguise.

  3. rich Says:
    September 24th, 2008 at 5:09 am

    trickle down yo momma !!!!!!! a liar telling the truth ???????????????

    http://www.youtube.com/watch?v=P8fgAS0w9Q8

  4. Heath Says:
    September 24th, 2008 at 7:06 am

    I just don’t get it. Why can’t we eat our own dog food. America spends its time promoting capitalism and imposing our ideas around the world, but when the test comes home congress is ready to bail out Wall street.

    It’s a big pill to swallow, but the market must be allowed to fail. You can’t have your cake and eat it too.

  5. Claudia Says:
    September 24th, 2008 at 8:13 am

    I think we all knew that! Yet we continue to pay taxes and they continue to misuse them!!! the Government doesn’t care about us people!!! They have their OWN agenda!!!

  6. Hank Says:
    September 24th, 2008 at 8:15 am

    There is no such thing as trickle down. Money given to the top of the money chain stays at the top. Trickle down is feeding the birds by giving the horse more oats. This is just more of the same, the rich taking care of the rich. It occurs to me that 700 billion in the hands of the people that owe the money on mortgages would fix the whole problem. That is the basic difference between the democrats and republicans. Democrats work the economy from the bottom up, and the republicans keep trying to work it from the top down. The problem is that the top down does not work.

  7. Dawn Says:
    September 24th, 2008 at 9:24 am

    Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange,is universally accepted to all participants in an exchange economy as payment for their goods or services, and can therefore be used as a store of value. i.e., as a means of savings.
    If men had no means to store value, i.e. to save, neither long range planning nor exchange would be possible!
    The abandonment of the Gold Standard made it possible for the welfare status to use the banking system as a means to an unlimited expansion of credit…..
    The law of supply and demand is not to be conned. As the supply of money (of claims) increase relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society loss value in thems of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes.

    In the absence of the gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make it’s holdings illegal as was done in the case of gold…The financial policy of the welfare state REQUIRES that there be no way for the owner of wealth to protect themselves.
    Alan Greenspan..http://www.nndb.com/people/164/000023095/..
    originally appeared in a newsletter: the Objectivist..1966. Reprinted by Rand Capitalism: The Unknown IdeaL

  8. EO Says:
    September 24th, 2008 at 10:25 pm

    If they actually pass this bail out, then it is all out all out major economic war against working people. It is unbelievable how much greed that some people have and when they actually make a mistake they still want more of your money.

    What has happened to people in the USA to put up with this? It seems like that either there are too many non-freedom type of people in the country, or there has been serious brain washing going on, and now most people are very sheepish.

  9. MarcStinebaugh Says:
    September 24th, 2008 at 11:45 pm

    They’re just robbers, it was OBVIOUSLY planned out long in advance. They’re robbing us so they can enslave and kill us, and that’s just how it is. Gotta look to the God of the Bible, the only God to save you from what’s coming, and that’s also, just how it is.

  10. EO Says:
    September 25th, 2008 at 4:58 pm

    NO Bailout for Big Banks. Let them get throw out like everyone else who can not pay bills.

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