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  • In Their Own Words: Geithner Makes the Case for Permanent Bailouts

    Conservatives say the Dodd Finance Bill means Wall Street Bailouts Forever. Progressives say the Dodd bill “makes bailouts impossible.” Who’s right? Well lets ask Treasury Secretary Timothy Geithner who described the bill this way in The Washington Post:

    The Senate bill gives the government the authority to wind down the firm with no exposure to the taxpayer. No more bailouts. Instead, we will have a bankruptcy-like regime where equityholders will be wiped out and the assets will be sold.

    “No more bailouts.” Sounds nice. But what does “bankruptcy-like regime” mean? Well, for starters, it means these firms will not actually go through bankruptcy. Instead the Dodd bill creates a new “orderly liquidation authority” that empowers the FDIC to liquidate the firm and wipe out shareholders. But the failing firm’s other creditors would still be eligible for a cash bailout. The situation is much like the scheme implemented for AIG in 2008, in which the largest beneficiaries weren’t stockholders, but rather other creditors, including foreign firms such as Deutsche Bank.

    In fact here is how Secretary Geithner described the 2008 bailout of AIG to Congress: “We didn’t rescue AIG. We intervened so we could dismember it safely.”

    And now, just this week, Secretary Geithner told The New York Timesabout the Dodd bill: “If a major institution manages itself to the edge of their abyss, we’re able to put them out of their misery … dismember them safely without taxpayers being exposed to a penny of risk of loss.”

    In other words, if you liked the Geithner bailout of AIG, you are going to love Dodd’s Permanent Wall Street Bailout Bill.

    Posted in Economics [slideshow_deploy]

    17 Responses to In Their Own Words: Geithner Makes the Case for Permanent Bailouts

    1. Pingback: Must Know Headlines 4.17.2010 — ExposeTheMedia.com

    2. stirling, Pennsylvan says:

      this is what you get when an administration supports a "Nanny State" mentality, rather then a "Free Market" solution. A True Free Market system allows companies to fail because risk is risk, and is treated as such. Nobody should be guarenteed anything but the opportunity to succeed. This Quasi Free market system will ultimately cause more harm then good because it will give advantages to some and disadvantage others because of regulation. When government actually gets out of the bailout business and stops trying to control the market our economy will be better off.

    3. Kary, Washington says:

      Why would equity holders be wiped out if there were assets to be sold? Shouldn’t the equity holders have 1st position on any assets? Why would anyone invest in a business if your holdings can be “wiped out?’ If there are bankruptcy laws, why aren’t they implemented?

    4. southernsue says:

      the answer to your question kary, is that this administration doesn't know what they are doing or they know exactly what they are doing and they are intent on destroying our america.

    5. Tim Az says:

      The Mao-Bama regime believes that equity holders take money from the regime. They are simply going to claim it in the name social justice.

    6. Rick says:

      Why would anyone invest in a bank stock? Why would anyone invest in an auto manufacturing stock? Why would anyone invest in an equities management or investment management stock?

      Let's just "invest" in the government and let them take care of us.

    7. Drew Page, IL says:

      Hold it. When people buy stock, nobody complains when the price goes up and they make a bundle. Why is there this over-concern with stockholders getting burned when a company goes under? Buying stock is a risk; with it comes the potential of gain or loss. You don't want the risk? Don't buy stock.

      When a company files for bankruptcy, all "golden parachutes" and promised bonuses for company executives should be nullified. The first people who should be paid are that company's creditors and investors second. Investors knew they were taking a risk on the performance of the company when they bought the stock and they have the opton of suing their board of directors for breach of fiduciary responsibility under ERISA. Suppliers of a company were not gambling on the performance of the company in order to earn gains.

    8. Sonia, Nevada says:

      It seems to me that one of the unintended consequences of this will be the eventual elimination of the stock market and investing in general. I guess all forms of providing for yourself and your future will now be gone and you can look to Big Government to take care of you.
      God help us.

    9. Dukster, Colorado says:

      First, I do not like the idea of any ‘regime’ deciding on the disposition of stock holders (also known as equity holders) assets…Secondly, the $50 Billion ‘backstop’ will, IMO, simply encourage the unscrupulous to take more questionable risks and finally, if our government wants to guarantee anything, it should be that they will leave the private sector alone, and allow them the freedom to either succeed or fail and reap the subsequent benefits or pain.

    10. Gerry Box, Edmonton, says:

      Every time I see Timothy Geithner on TV. I see the word "CROOK" in front of his face. To me, he's just the wter-carrier for Obama and the rest of this idiotic group of socialists. They want to destroy everything American and make it everything Russian/Chinese. We are in a heap of doo-doo.

      Gerry Box

    11. Pingback: Morning Bell: The Wall Street Bailout Bill Threat to Your Bottom Line | The Foundry: Conservative Policy News.

    12. BobM, FL says:

      We have GAAP, we have Sarbanes-Oxley, we have the FDIC, we have the SEC and we have the Treasury, we have oversight committees. All combined these entities/regulations did nothign to prevent the mess that came to a boiling point in 08. What would make any sane person beleive that a new set of regulations would work? Maybe a hammer to your fingers until you say "I Beleive". Our governement is incapable of "managing" the financial workings of our economy – they have proved it time after time. This is nothing more than a power grab by the Executive branch. risk is inherent in any transaction, those who lose can face the prospect of bankruptcy and dissolve or reformulate – seems to work pretty well for the airlines.

    13. Lynn,New Jersey says:

      The obvious reason for dismissing the stockholders in this plan is that this administration does not want to encourage investment in Wall Street. Make it as scary and risky as possible for the average person to purchase stocks and investors will place their hard earned and waning dollars elsewhere. Bye -bye Wall Street. Just what the Obama ordered.

    14. Petes Farm says:

      Why r We the Ppl even here in a parasitic environment THEY created???

    15. Pingback: Obama Plan Blows Secret Kisses to Wall Street | The Foundry: Conservative Policy News.

    16. Pingback: Obama plan blows secret kisses to Wall Street | The Daily Caller - Breaking News, Opinion, Research, and Entertainment

    17. Pingback: Obama Plan Blows Secret Kisses to Wall Street | BeyondBailouts.org

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