Thursday, March 19, 2009


Yesterday, an acquaintance of mine who I consider informed and intelligent, said this to me: “I can’t listen to any more of these reports about AIG because I don’t know what the hell they’re talking about. It’s just too confusing.”

That made me start to wonder if there might be a widespread “bailout malaise” coming over Americans. And that is the worst thing that could happen. So, I’ve decided to over-simplify this crisis. Listen up. When the economy started to go south, the government stepped in to reinvigorate it by doling out some money to the banks. The banks, in turn, were to make loans to the American people, so that they would start spending again, and re-infuse the system. Period. Make no mistake here. I’m not trying to speak to you as though you’re incapable of figuring this out for yourself. I’m just reminding you of the premise of this dilemma.

Unfortunately, bankers are bad boys. And bad boys do not follow the rules, even bad boys in $1500 suits and $600 shoes. Bad boy bankers took some of the cash and paid off some of their own debts to other banks, instead of loaning the money as they were supposed to. Then, as some of their organizations were hanging on by a thread, some of the bad boy bankers paid what may ultimately be hundreds of millions of dollars in “retention payments,” allegedly so their treasured top employees would not quit. But then it was revealed that some of those who received the massive payouts had actually been involved in their companies’ downfalls that led to the need for bailout cash. And even worse, some of those who were paid retention payments no longer even work for the companies who paid them millions of dollars to stay.

Anecdotally, the stories keep coming at us: Remember the Big Three auto CEOs (below) who each took private planes to Washington to beg for bailout money, without even a plan to present Congress on how they would spend it? Remember John Thain of Merrill Lynch, the CEO who presided over record corporate losses, but still approved a capital expenditure of $1.22 million to remodel his office and conference room? Perhaps you heard the news today that 13 companies who have received government bailout funds owe a total of $220 million in back taxes. Some of the taxes owed date back five years. Here’s the rub: Each company signed a contract that stated they owed no back taxes. Inexplicably, the U.S. government took each at their word, and did not request tax records.

You begin to see the true nature of this mammoth debacle. It is not a time to give in to the temptation of malaise. Your government did not exercise due diligence. It did not properly research the financial condition of the companies it bailed out. It did not monitor the manner in which those companies spent the money. It did not properly stipulate parameters under which recipients could allocate salaries and/or bonuses to employees who may have played a major role in this country’s economic collapse. It failed to take into account the part that personal or corporate greed could play in manipulating the bailout process. Further, the government did not use foresight when it enabled the banks to bail out desperate homeowners. Statistics now show that more than half of Americans who were aided by the banks ended up defaulting on their loans within six months.

So, I say to my acquaintance mentioned earlier in this piece: You cannot afford right now to let your guard down. You can’t possibly allow yourself to stop listening or to ignore any of this. It is about you. And me. And everyone we know. The free enterprise system is in near-collapse, and the U.S., the most powerful nation in the free world is losing stature, power and direction. “Bailout malaise” is not an option. Sit up, pay attention, stash some money away, do everything possible to stay employed and simply hope we can ride this out and survive.

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