The Coalition of the Swilling

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April 24, 2009

That Sucking Sound You Hear

...isn't just the Obama administration.

...Ethisphere, a research think tank that examines whether companies can benefit from using ethical practices, created a TARP Index in December to track losses taxpayers are taking under the TARP program. Since TARP's inception on Oct. 7, 2008, the government has lost $104.2 billion [as of Apr. 10]. The Treasury Dept. did not respond to questions about the losses so far.


The index was created out of skepticism about a remark by Senator Judd Gregg [R-N.H.] that TARP would turn out to be profitable for the government. "It rang hollow for us. [Gregg] was taking into account the imputed interest averaging across these investments," says Alex Brigham, Ethisphere's executive director.

"You can get paid interest, but if you don't get your principal back, who cares?"

...As a result of the plunge in Citigroup's stock since February, Ethisphere has marked down the value of the government's $45 billion investment in the bank, says Linssen. In February, Citi converted $25 billion in preferred shares the government had received into common equity, which translated to a 36% stake in the company. That, plus the conversion of an additional $27.5 billion of other publicly held preferred shares, diluted existing shareholders and sparked a sell-off in Citi's shares. The government's stake is now worth just $13 billion, estimates Linssen.

The calculated losses don't include the potential hit the government could take on assets that it has guaranteed for some of these banks, such as $300 billion of Citigroup's assets. "By all indications, it sounds like the government doesn't know what they have in the TARP program," says Linssen. "It doesn't know how much [it has] made. My opinion is they don't know how much they're guaranteeing."

And no one in the current administration nor Democratic Congress will bother with this little nugget:

Bailouts Don't Create Jobs: Startups Do

...Consider these stats: From 1980 to 2008, startups, defined in this case as companies less than five years old, accounted for all net job growth in the U.S., according to the Kauffman Foundation's Business Dynamics Statistics, a series of reports that rely on newly released data from the Census Bureau. The reports show that average annual net employment growth rate for startups was about 3% a year while the growth of the rest of the U.S. private sector for the same period was about 1.8%.

So, without these startups, the U.S. net employment growth rate would actually be negative.

In other words, if President Barack Obama wants to foster a recovery, a good way to do so through the private sector is to focus on creating and supporting new companies. The current approach of pouring money into decrepit, poorly managed companies is actually a way to reverse job and productivity growth in the U.S.

Sorry. That doesn't fit the descriptive narrative they've chosen. We're doomed.

How's that whole Taliban/Pakistan thing going?

Posted by tree hugging sister at April 24, 2009 07:44 AM

Comments

Posted by: nightfly at April 24, 2009 12:28 PM