Monday, November 2, 2009

Bailout Shmailout

What $1,000,000,000 Looks Like

Was the federal bailout of corporations a wise thing? Did we really expect that everything would be hunky dory if we backed up the financial institutions and automobile manufacturers with money out of each citizen’s pockets?

I had my doubts then, and I still have doubts after a couple of breaking stories in the past day or so.

First – CIT group, which received $2.3 billion from the federal government – filed for bankruptcy on Sunday. It’s going to go through reorganization, and will wipe out holders of its common and preferred stock. So guess what? This means the federal government (read YOU and ME) will lose the $2.3 billion we gave them in return for preferred shares.

Second – Ford Motor Company, which did NOT receive any bailout money when the other auto companies eagerly snatched it up, this morning said it had income of nearly $1 billion during this year’s third quarter. Sure, a lot of it is due to some fancy-dancy money juggling, but to their credit, Ford cut its expenses by a billion dollars.

There certainly are nuances to both developments, but at least on the surface, it appears that accepting the bailout money didn’t help CIT one bit, and rejecting the money didn’t affect Ford negatively at all.

1 comment:

casch said...

So amazing! So who benefited from the bailout money! (said sarcastically)