The US Government, fresh from bailing out AIG from being mismanaged, now is about to bail out tons of banks and other financial intuitions who were mismanaged. The boards, executives and upper management knew the risks they were taking, took in millions of dollars in compensation, without regard to the consequences if their risks went bad, as they knew they would sooner or later, since tons of people have been warning about the then pending housing crisis for well over 5 years before the bubble burst, and have been warning of other economic problems just as long or longer.
The burden of their greed will be carried by the American taxpayer to the tune of hundreds of billions of dollars (AIG alone is over $85 billion). Yet what will become of the board, executives and upper management? Nothing. The CEO of AIG is being replaced, but he still got $7 million for his 3 months there, and we can be sure he’ll just go on to the next muli-million a year job. Richard Fuld at Lehman Brothers walked away with nearly $490 million after selling his options. The only punishment I have heard about so far from our government is to block $24 million to the heads of Fannie May and Freddie Mac.
Meanwhile, while these people tanked the American economy, and made millions (combined perhaps billions) doing it and will get to go about their multi-million dollar lives, the regular hard working, taxpaying American will bear the burden. Those of us who have to decide which bill to skip this month, and can only dream of having enough for a 401k, let alone a more serious retirement plan, have to go hungry some days so the kids can eat healthy, will be paying for the errors of these board members and executives of these financial intuitions.

That isn’t to say there is anything wrong with success and making as much as you can, it is strong motivator. If I put twice the effort and work that Joe does, and we both get the same gain, why work as hard? No the fundamental of capitalism is sound; it is when greed steps in that it loses its way. When the CEO of Wal-Mart makes $8.7 million, while the low level people make minimum wage, which is when we have a problem. There should be a more gradual scale up the slope, not a sudden jump the way most American companies do.
Okay, so there are people who have lots invested in these companies and will be hurt if the government doesn’t help out. The problem is, they knew the risks, especially if so many of their eggs were in one sector that it that sector completely failed, they would be hurt. Their risk should be their loss. That is why it is called a risk. The way it is supposed to work is that the greater the risk, the greater the potential gain, AND the potential loss. The government now wants to remove the punishment for investors for taking a risk. The “we have to protect investors and people’s retirement accounts” argument is the same ill conceived argument they offer for not having a windfall tax on the oil companies. The problem is that any good retirement account and investor should be diversified enough that any problems in any one company, or sector should never hurt you to any real degree, if it does, then they were the one who took the risk, they chose to lean heavily on one sector, or have a retirement plan that relied to heavily on that sector. Further, in the case of the oil industry windfall tax, any windfall tax would be far enough out to let the people get out from the investment before their losses were too great. (To be fair to the oil companies, their per-dollar earned is well less than half that of pharmaceutical companies, which are beaten only by banks, but then again they make up for it in sheer volume.) Anyhow, the point is, investing is supposed to have risks. We can’t reward investors for taking a risk and then loosing. I probably will never have enough money to invest in anything, but I know enough that if I ever do to keep it diversified enough to manage risk. Why not make every Mega Millions ticket a winner for the full amount? This is basically what our government is doing for the investors in this sector.
Their next argument is that if they don’t bail these banks and financial intuitions out, then they won’t be able to give out so many loans. Good! We need to get away from debt. We need to stop having our currency rest on a mountain of debt. The American public needs to stop paying tomorrow so it can have something today. A debt based economy is exactly why we are in the mess that we are in. This isn’t to say we absolutely need to return to a gold standard, though we probably should. You can have a well run fiat currency, but one based on debt the way the Federal Reserve does, isn’t a good idea. Debt is never a good idea.
If then we accept that neither investor protection, nor protecting America’s debt culture are good arguments, then what is? The sad truth is, there is none. This won’t let the government stop from giving away hundreds of billions of dollars. Worse still is that the only punishment the government will deal out isn’t to the people responsible, but to us, the everyday American who is struggling to make ends meet.