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The Congress Bailout Did Not Help Americans.

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Following the beginning of the 2008 economic meltdown, the financial and automotive industries who had been clamoring against Congressional or governmental oversight and regulation came running to Congress to plead for a Congress bailout of the struggling American corporations.

The economic crisis was started by the subprime mortgage crisis in which financial institutions were handing out mortgages left and right to people who would usually be unable to receive them and then passing the dangerous mortgages, as bundles, to other institutions who would then receive insurance on the mortgages thus endangering the insurance industry as well.

Along with the subprime mortgage crisis, the economy took a massive hit when its irresponsible and previously illegal practices caught up with them, and the practice of “stock betting” in which investors would in essence bet on the future value of stock and raise the price of that stock based on nothing, hit Wall Street like a ton of bricks.

Very quickly companies like Lehman Brothers, Bear Stearns, and AIG insurance began to face the threat of bankruptcy and other corporations like Citigroup, Bank of America, and JP Morgan Chase soon followed the threat of collapse.

Congress was quick to oblige and give free money without any oversight (seem familiar?) to the very same companies responsible for the economic crisis.

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The Citi Bailout

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The Congress Bailout Bill

The Emergency Economic Stabilization Act, better known as the Congress bailout bill, was originally proposed by the Secretary of the Treasury Henry Paulson as a three page document that would allocate $700 billion to either purchase the bad assets owned by the banks or make capital injections into the banks.

As bad as Paulson’s proposal was, Congress simply could not leave bad enough alone, especially the House of Representatives.

In numerous introductions on the floor of Congress, the bill quickly swelled from three pages to 110 pages and more than 450 pages after that.

The additional pages earmarked pet projects of Senators and Representatives in order to buy their votes for the unpopular bailout plan which also swelled from the massive $700 billion price tag to $850 billion with $150 billion going towards earmarked projects.

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The Congress Bailout Program

While the Emergency Economic Stabilization Act allocated the funds for the bailout, it created the Troubled Assets Relief Program to oversee the distribution of those funds by purchasing assets and equities from the struggling financial institutions.

Soon after the introduction of the program, President George Bush and Secretary Paulson announced that the Troubled Assets Relief Program would also be able to buy preferred stock, stock that gets paid off before regular stock holders do, in the largest American Banks, including the ones that combine to make up the Federal Reserve Bank System.

The program came under fire even before its inception as critics argued that the program did nothing to help regular Americans who were struggling because of this crisis.

The critics were right as banks, who were allowed to use the government money as they wished, did not use much of the money to lend to the public.

So far the bailout has paid for $50 billion worth of equity to be bought from Citigroup, $45 billion from Bank of America, $40 billion from AIG insurance, $25 from JP Morgan Chase, and another $25 billion from Wells Fargo. A recent report noted that after a recent purchase of stock the United States ironically became the majority owner of the Bank of America whose name never seemed so appropriate.

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The Auto Bailout

A very underreported story of 2008 was the $25 billion dollar bailout that Congress gave the automotive industry just before they doled out another $850 billion in the bank bailout.

The bailout of the big three automakers, Ford, General Motors, and Chrysler did not last long and soon after the CEOs of the automakers came back to Washington to request another $25 billion or so.

Congress was not buying it this time and it seemed as if another Congress bailout of the auto industry would not happen and the automakers would have to face bankruptcy.

It seemed that way right up until President Bush chose to make his umpteenth unpopular and ill conceived decision by granting two of the Big Three, General Motors and Chrysler, $18-plus billion dollars in funds from the money allocated in the bailout of the banking industry.

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