Problem with the banks (and many other huger corporations in US ie: airlines) is that during prosperity all the profits are going to narrow set of people (board and investors) but during the crisis there's always bailout using taxpayers money to save them. It essentially means that profits stay with the wealthy while losses are being spread across the poor. This is no longer capitalism but communism where they ruling party (boards and investors) are getting richer without the risk.
The best analogy I use for logical errors such as this is -
If you have a dependent - ie a child - whom you are a primary source of care. Should you qualify for a bigger helping hand than say, the 25 year old with no children?
If you agree - then now imagine you have 500 dependents. Or in the case of some corps 500,000.
You have half a million dependents who rely on you every other week for a paycheck.
Do you qualify for a larger helping hand than the 25 year old who lives alone?
I'm not saying bailout is wrong, but taxpayers should be handsomely rewarded for those bailouts (at least 20% APR) as those bailout companies were making a lot of money on taxpayers and never shared any profits with them (they even avoid paying taxes though various financial means).
Agreed - which is why I strongly support the administration demanding equity in the companies that are receiving money.
And I only support money given as loans which must be paid back. Any kind of grant money must be exclusively used for payroll or other qualifying operating expenses.
The current stimulus is not perfect but its pretty good and FAR better than 2008
It's not a "logical error," it's an "ideological error," at least from your perspective. Banks are not parents, and small businesses are not "dependent children," so I'd say you're making a bigger logical fallacy called a false equivalence.
> Do you qualify for a larger helping hand than the 25 year old who lives alone?
No, because the "helping hand" you're getting is not helping the "children" eat in this situation. None of this $10B is going to small businesses, is it? It's literally just a payday for the bank. If you give a parent $400 extra a month, that is going towards daycare, food, etc. for their child. Your metaphor misses the mark completely.
His post is not addressing this issue of bank fees hes making a wider point about bailouts in general.
I am simply reminding him that airline companies who did nothing wrong have people depending on them for their paychecks. Exactly the same as a child depends on their parent.
And in this case the money given to AIRLINES helps a lot of parents feed their children
...just give them money directly to those parents instead. When you give money to the airlines, those airlines like handing out bonuses to their execs, and initiating stock buybacks with the confidence that they'll get bailed out in case hard times hit. Airlines are not parents, and they are not invested in their employees wellbeing. It's a false equivalency because an employer-employee relation is nothing like a parent-child relation.
> airline companies who did nothing wrong
Airline companies did do something wrong. They didn't prepare for this situation when they had cash reserves, instead they initiated buybacks to enrich board members and executives. Greed should not be rewarded, wisdom and caution should.
Grants for employee salaries and benefits like health insurance, low interest loan to be paid back, and a stake in the company in the form of equity. And all with strings attached so they can't hand out bonuses or lobby congress.
Businesses operate on revenue and margin and companies like airlines can't justify using even 1% of its revenue to "save" for rainy days. Their tickets have to be as cheap as possible and they have to market to as many people as possible. Its unreasonable to ask them to lay out millions on the chance an act of god rolls through.
As a company they have plenty of ways to raise capital to weather major events, including selling stock, which is what they are doing - to the government in exchange for favorable loans and a grant.
But to sum up: if you are a company with $1 million on hand at the end of the year you have to disperse it somehow.
- If you put it in a bank account you'll earn 0.2% interest on your "investment"
- If you pay out dividends your shareholders will earn 1-2% (estimate) on their investments
- If you buy back your own stock your shareholders can see 4-5% (estimate) on their investments + you have shares you can award to employees in the form of options or direct without diluting the market
The number 1 factor in your decision? Taxes. Which option pays the least tax? Option 3
