George Bush, Jr., as he left office, bailed out Wall Street (the banks) to 'save the world economy' and because the banks were 'too big to fail'. He spent about $300 billion and handed off another $400 billion or so to Obama to finish the job. They called it TARP.
Obama not only continued the bank bailout but added the auto companies to the list and heaped money on GM and Chrysler (Ford refused). Interesting that Obama forced money on some of the banks that didn't want, nor need, bail out assistance. Strange, huh? Not really, read on.
So what was it that made these businesses TOO BIG TO FAIL? Let's take the banks first. The federal government muscled banks to make questionable loans to a large set of the populace that could not afford to own homes (called sub-prime mortgages). They claimed to back these banks by having Freddie Mac and Fannie Mae support these loans with tax payer money. George Bush, Sr. signed legislation that stated that Fannie and Freddie have an affirmative obligation to facilitate the financing of affordable housing for low-income and moderate-income families. They set a target of 30% for loans to this segment. In 1999, Fannie and Freddie came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas. They drove the percentage to over 55%. (this also served the Clinton economy).
These actions supported the Liberal cause by making loans to moochers who vote Democratic (and favored racial groups) while hyping the economy (we call it a bubble). When the government creates a partnership with selected large corporations to further their mutual causes it is called CRONY CAPITALISM. Also in most, if not all cases, it results in disaster because it interferes with natural FREE MARKET FUNDAMENTALS.
So when the 'stuff' hits the fan (in this case the sub-prime homeowners can't make their payments and the price of their homes fall below the their mortgage balance) the government starts scrambling because their SCAM IS TOO BIG TO FAIL and the politicians need to cover up the facts of their actions that caused the problems. So they buy off their cronies with bail outs. The last thing they want is for the banks to tell how they were forced, and enticed, into violating their own regulations and business practices at their government partner's urgings. So politicians bail out their cronies with taxpayer money and government debt to keep them quite and to get their continued co-operation (not to mention big contributions to their campaign funds). It is a typical government cover up.
And why bail out the auto companies? Look at the two major factors that have made the American auto companies fail. The first was labor laws and government practices that backed the labor unions with excessive wage rates, lucrative health care plans, and ridiculous retirement plans. If that isn't enough to keep you from competing in a world market add severe regulations on top of the labor costs. Regulations that dictate what kind of products the auto companies must make to meet fleet emission standards and mileage regulations supporting the government's global warming scam. The government then makes it difficult for the auto companies to build plants in labor markets where they would be competitive. Again when the stuff hits the fan and the auto companies approach bankruptcy, the government must bail them out. It just would not serve the politicians interests for the auto companies to, first, tell the public why they failed. And next, for the companies to take the actions necessary to get rid of union contracts and to demand less regulation. As it is, the government and their crony auto executives are just kicking the can down the road. The auto companies will fail again unless they throw off union and government control. American companies have no chance in competing against free market competitors with lower costs and the freedom to build autos that world buyers desire.
Interesting that even though Ford didn't take bail out money, they are on the record supporting the bail out program. Are you kidding me? Obviously they have been threatened to not criticize the 'hush money bail out'. The rumor is they were recently encouraged to take down an ad bragging about not taking bail out money. The Obamas were quick to announce that Ford had approved of the bail out even though they didn't participate.
What are the lessons learned? Moderate Republicans, the Bushs, will pass legislation working with the Libs that seems reasonable at the time. The Dems (Clinton, Obama, etc.) will then dramatically alter the implementation to buy votes and ultimately do considerable damage to the economy. Example: George, Jr. hands Obama $400 billion in TARP. Obama immediately adds another trillion in stimulus. George, Sr. passes sub-prime legislation, and Clinton drives a truck through the opening he was given.
Think about it and vote the bums out before they destroy other industries and bankrupt the nation. Also, beware of Moderate Republicans. If it wasn't for George, Jr. there would not be an Obama in the White House. If it wasn't for George, Sr. there would not have been a Bill Clinton.