OpEdNews Op Eds

Bernanke Admits Bailout is NOT Aimed at Helping Taxpayers

By (about the author)     Permalink       (Page 1 of 1 pages)
Related Topic(s): ; ; , Add Tags Add to My Group(s)

View Ratings | Rate It

opednews.com

Become a Fan
  (5 fans)
- Advertisement -

Apologists for the bailout plan say that it will have a trickle-down benefit for taxpayers.

But in his testimony to the Senate today, Bernanke pretty much admitted that the bailout isn't aimed at helping taxpayers.

Specifically, as the Wall Street Journal summarizes it:

Bernanke used his time to argue for not buying assets at fire-sale prices in the Treasury's $700 billion bailout proposal.

***

Mr. Bernanke said the Treasury plan should have taxpayers buy the assets and hold them at close to their maturity value. Removing the assets, he said, would bring liquidity back to markets, unfreeze credit markets, reduce uncertainty and allow banks to attract private capital. (Reuters has a partial transcript)

Forcing assets down to even lower fire-sale prices would protect taxpayers the most, since the government would own the assets below the value if held to maturity. As long as those securities didn’t flat-out default, the government’s purchase would have a substantial upside. However, Mr. Bernanke essentially argued that doing so would hurt markets even further and wouldn’t solve the problem facing the economy. In pushing back against congressional efforts to change the Treasury proposal, Mr. Bernanke said: “We cannot impose punitive measures on institutions that choose to sell assets.” The beneficiaries would be not just the companies selling, but markets and the overall economy, he said.

- Advertisement -

Still, he acknowledged that the precise approach to doing so hadn’t been determined, arguing for flexibility. “We do not know exactly what the best design is,” and that would come from consultation with experts, Mr. Bernanke said.

“We believe that strong and timely action is urgently needed to stabilize our markets and our economy,” he said.

In subsequent questioning, Mr. Bernanke distinguished between, on the one hand, “fire sale prices,” the ones that prevail “when you sell into an illiquid market” and, on the other, the prices that holders think the assets are really worth, sometimes described as “fundamental” values or “hold-to-maturity” value.

“The holders have a view of what they think it’s worth. It’s hard for outsiders to know,” Mr. Bernanke said. The point of an auction is to reveal those prices.

So Bernanke is arguing against the government purchasing Wall Street's toxic assets at their real price (which would benefit taxpayers) and for the Wall Street firms themselves to set whatever arbitrary price they like, since they "have a view of what they think it's worth" and "it's hard for outsiders to know".

Further proof of the fact that the bailout is not aimed at helping taxpayers is that even very wealthy, solvent Wall Street (and foreign) firms may get bailout money.  See this.
- Advertisement -

 

George Washington


As a political activist for decades, I have rejoiced in victories for the people and mourned in defeats. I chose the pen name "George Washington" because - as Washington's biographies show - he wasn't a (more...)
 

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon


Go To Commenting

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact Author Contact Editor View Authors' Articles
Related Topic(s): ; ; , Add Tags
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Top Financial Experts Say World War 3 Is Coming -- Unless We Stop It

Indonesian Health Minister Says Swine Flu Might Have Been Man-Made | Epidemiologists and Virologists Need to Weigh In

Obama Is Considering Doing Something Even Bush Didn't Try: "Preventive Detention" of People Who Will Never Get a Trial

How To Solve the Economic Crisis

The Four Reasons the Mainstream Media Is Worthless

5 Reasons that Corporate Media Coverage is Pro-War

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
1 people are discussing this page, with 1 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

Bernanke would like his friends to get top dollar ... by Rolland Miller on Tuesday, Sep 23, 2008 at 5:03:58 PM