Paulson's Gift (Banking Bailout was the Biggest Taxpayer Rippoff Ever)

University of Chicago Graduate School of Business ^ | 11/11/2008 | Pietro Veronesi and Luigi Zingales

[curiosity]

We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial system. We estimate that the revised Paulson plan increased the value of banks’ financial claims by $109 billion at a taxpayers’ cost of $112 -135 billions, creating no value in the banking sector. We compare the cost of Paulson’s plan with the costs of alternative solutions that would have achieved the same objective in term of solvency of the banking system. We find that the revised Paulson plan is the most expensive for the taxpayers, second only to the original Paulson plan. The biggest beneficiaries of this massive redistribution were the debtholders of financial institutions, especially those of the three former investment banks and of Citigroup. The equity holders just broke even.

[mortal19440]

So far. Stand by, you ain’t seen nothing yet!!!

[org.whodat]

What about bailouts, 2 and 3 and 4 and 5 and 6 and 7 and 8, I guess you know here this is going.

[Tempest]

Some idiots around here tried to sell the crap bailout as a money making boon for the people.

[FrankR]

The timing of all this bailout stuff was just too damn convenient to the elections to suit me...I smell a democRAT.

The Rats know that that an economy in trouble is usually fatal to the sitting administration...yet, Paulson et al want us to believe a bailout in the $700 billion range was evident a year ago, two years ago? But the move - the big "emergency" just had to take place right before the elections.

But that big "emergency" hasn't been doled out to the first one of the "losers" that I know about - instead we keep hearing about additional "nominees" for the money (like the big 3 automakers) and even more new & improved bailouts.

What will Americans do next...run to their nearest tattoo parlor and have "IDIOT" put on their foreheads in red, white, and blue?

Jeeessshhhhhh!

[Wuli]

ping for later

[Post Toasties]

Paulson is a tremendous fool (or a Leftist tool, or both), and GWB is almost as great a fool for appointing him in the first place. What ever possessed GWB to appoint a Democrat to Treasury Secretary anyway?

[berdie]

You know, I was for the “original” bailout and argued strenuously with several freepers about the good it would do, verses the benefit of an all-out depression. It just seemed that the original plan made economic sense. But it didn't pass.

But then came the new and improved bailout with provisions for wooden arrows and movie makers. It did pass.

Now everybody is lined up with their hand out.

I hate the fact that I was so darn naive.

I fear this is some kind of game being played.

[dalebert]

yup. where is the money?

[Ronzo]

Thank you so much for posting this...bookmarked for later research and study.

[Deo volente]

I just can’t get the song, “We’ve Only Just Begun” out of my head right now.

[Rightone]

This is a long article, but it explains a lot and for those who want to understand who made the money in this fiasco and who lost, read on. I am sick. I’m one who lost and lost a lot by playing by the rules and getting screwed in the end.

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

[Orange1998]

Uhhhhh.... bonuses for Wallstreet.

[curiosity]

They show that the original plan was actually worse than what Paulson actually did. But both are bad.

Why did no one listen to professor Zingales back when he was writing against the plan?

[curiosity]

An article (a research paper, really) for your ping list.

[berdie]

So how was the initial plan worse than the final bailout?

(Well, not final...it will go on and on)

[curiosity]

So how was the initial plan worse than the final bailout?

The initial plan was for the government to buy toxic assets from financial institutions for cash. It would have exposed taxpayers to huge risks, likely would have overpaid for the assets, and given little to no upside.

Under the current plan, we get some in the financial institutions in return for the money we give them. It gives us (the taxpayer) some of the upside, and it avoids having to value the toxic assets.

It still stinks. Accelerated bankruptcy was the right course of action.

[EVO X]

You know, I was for the “original” bailout and argued strenuously with several freepers about the good it would do, verses the benefit of an all-out depression

The plan was sold as needed to prevent a total derivatives meltdown. It is a real paradox. Your dumping money into businesses with bad business plans, so they can do more of the same. But if we don't, we are told the whole financial system evaporates.

If these businesses are too big to fail and threaten the financial system if they do, they need to be broken up into smaller chunks.

$.02

[berdie]

“Accelerated bankruptcy was the right course of action.”

This whole thing is beginning to remind me of having a loved relative on drugs. First off, they lie. But you want them to succeed, so you give them $100 here and $100 there to keep them afloat. (and they share with their friends.) And all of a sudden...you are as broke as they are.

[berdie]

“The plan was sold as needed..”

That is what worries me right now. I don’t trust the government or the media. So I am not sure that what is happening is real or generated. But whatever it is sure seems to be working.