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Should TARP Funds Be Used To Bail Out Foreign Banks?: Left of Center View

Letís face it folks, we live in a global economy. Money moves around the world constantly. We buy, borrow and sell to and from people all over the world every day. People in Kansas have farms financed by banks in Japan and those banks are backed by securities based in Europe. Thatís just the way things are. The Troubled Assets Relief Program (TARP) was designed to stabilize the economy. To do that for America, we need our trading partners to be stable too. We cannot be protectionist in our policies and expect it to help our overall economy.

A lot of people try to say that because some of the money from TARP has been used to stabilize foreign banks that paid American companies to insure their assets that we should somehow cut off the program and get all our money back. While nobody likes tax money making the rich richer it does seem that the TARP money has been having some positive impact on the overall global economy. The markets have been improving lately and there are signs that things are beginning turn around. Some prominent economists have said that they expect the recession to end later this year. If itís working why stop now?

There are banks already beginning to repay the money they have gotten through the TARP program. The money may be taxpayer money but it is serving the purpose it was designed to serve. The banks are becoming more stable and the layoffs are slowing down. There was never going to be a magic bullet that would fix the entire mess overnight. The people in Washington had to do something and this was the best they could think of to do. Is it a perfect plan? No, of course itís not but it is something to try to fix a problem that has grown to global proportions. Just because some of the money is going into foreign banks it does not mean it isnít in the best interests of the American people. The more stable the global economy is the better it is for our economy.

What seems to be a foreign concept to conservatives is the holistic nature of the global economy. If the European or Asian economy is negatively impacted, we feel it. If there are economic downturns in South America, we are impacted. The global economy is larger than any one nation and just because American interests may not dominate the economy of a nation it does not follow that the nationís interests are not tied to ours.

Thatís not to say that we should just be giving the money away without conditions. There needs to be accountability. We cannot simply let foreign economies fail but we canít continuously throw money into them without getting a return on our investment either. We need to look to the future and work towards long term global economic stability. That means sometimes taxpayer money will leave the nation. I hate to tell you folks but we have been giving taxpayer money to other countries for years. We send billions of dollars to nations around the world every year in the form of financial and military aid. The only real substantive differences between TARP and other foreign aid are that an American corporation is part of the movement of the money into the foreign economy and that the American corporations may actually pay our government back.


LJ Finstermore - World Citizen | E-mail Comments on this column. | Click icon to Digg this article

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Next week's subject: Should The U.S. Government Be Able To Sieze Assets Hidden In Foreign Banks?

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Should TARP Funds Be Used To Bail Out Foreign Banks?: Right of Center View

The Troubled Assets Relief Program or TARP was implemented to stabilize the American financial industry. Banks and other financial services organizations in the U.S. that took heavy losses in the recent financial collapse can get government assistance to stabilize their organizations in order to avoid failing which could cause a ripple effect throughout the economy. While many are upset about saving banks from their own mistakes most economists agree that without the TARP program or something of its nature the industry collapse could become much worse. Some others however think we might have approached the whole situation with the wrong mindset.

What a lot of people may not realize and many of TARPís critics point to is that billions of dollars of TARP money has been used to pay for the protection of foreign banks. Companies like AIG provided protection for banks in other countries in the form of Credit Default Swaps (CDS). These swaps act as insurance against making poor business decisions. The banks holding the debt pay another company a regular payment to guarantee they get their money on the debt they hold. There is basically no regulation of these swaps and if suddenly one bank has a lot of debt defaulted on by their customers another company can lose millions or even billions of dollars even if they donít have the reserve capital to pay the losses. Unlike traditional insurance which is regulated and requires that insurers have sufficient reserves to cover all of their policies, these CDS policies can be sold regardless of the money the institution has to back them up.

When foreign banks holding mortgages and credit lines that could not be paid by their customers adversely impacted by a global economic decline, they began to call on the American companies they had paid to protect them against losses. The American companies then had to pay out money they didnít have reserves to pay and began to collapse. As the U.S. government felt the collapse of these companies would be overly detrimental to the American economy TARP was born. Instead of forcing the banks and other agencies to reorganize under bankruptcy protection where they could have made settlements with their customers on the CDS business our government stepped in and used taxpayer money to back the bad insurance policies.

So the question arises, should American taxpayers be paying for these bad non-insurance insurance policies sold to institutions that made bad lending decisions half way across the world? It seems that we are paying for bad decisions compounded by other bad decisions and getting nothing for it. Why couldnít we let AIG and others file for bankruptcy protections, settle their debts for less and come out of the process with a reorganized company better suited to operate on reality as opposed to operating in a fantasy world of financial shell games?

The free market is supposed to operate on a stand or fall basis. If you make a bad decision, you pay for it. These companies sold policies they didnít have enough money to back. They need to be allowed to fail. The foreign banks bought these CDS policies without making sure the people they were buying from were stable enough to pay them off. Everyone made bad decisions but we are the ones paying for them. Itís time to say enough is enough and stop bailing out the banks here or elsewhere. The people should be demanding our money back and telling the banks that next time they should think before they risk money on stupid ideas like Credit Default Swaps.

The Realist - Patriot at Large | E-mail Comments on this column. | Click icon to Digg this article

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Last Week's View from the Right:
The Obama World Tour

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A Legal Immigrantís Perspective

If you are not a Native American, you are an immigrant, so am I. I came legally to this country at the age of five with my parents who worked hard, paid taxes (even Jesus paid taxes), lived by the rules of this great nation and never took or accepted a penny from the government. We came seeking FREEDOM from a communist country. It was months before we were able to enter the US legally. I remember us getting medical exams, shots (small pox), background check, references, and going through numerous interviews once we arrived. I also remembered people coming to the US from all over the world who waited years since it was based on "Quotas". Read more...

Solving Our Immigration Problem

The major problem our country is facing with illegal immigrants today is because of the exploitation of these immigrants. We believe the solution to this problem is two-fold. First, we should allow more immigrants in this country to cut down on the number of illegal ones. Second, all immigrants should be educated about their rights at the expense of the government. Below, you will find an in-depth look at our suggested reforms.

Reforms for immigration limitations:

-New immigrants can't equal more than 1% of the US population in a given year (the population being from the last recorded census). That 1% will be further divided up to allow only a certain number of immigrants each month.
-Each country of origin for immigrants will be allowed a certain percentage of that 1%. No country could receive more than 10% of the total amount and no country can receive less than .1% of it. The left over percentage will be divided up between all countries as follows: Read more...

Do Elements Within the La Raza Movement Pose a Threat to America?

La Raza means literally ďThe RaceĒ in Spanish. The movement was formed in 1968 to promote the interests of the Mexican-American community. Like the NAACP and other affirmative-action minded organizations, La Raza has many members that are interested in being part of America and promoting equality for all Americans. The fundamental goals as stated by the movement are benign and represent the ideals of American diversity and cultural pride.

There is another movement affiliated with La Raza that has historically been more militant and still maintains documents within their organization that point to isolationistic views Read More

A Plan

The one major thing that seems to be lacking in the immigration debate is a real plan that addresses the legitimate concerns with illegal immigration. There are strong opinions on both sides and a lot of rhetoric but there isnít really any solid plan being promoted to address the illegal immigration issue in a way that is both fair and logical.

So, that being said here is my idea:Read More

Trucking Cross Borders

This is mainly a concern for the trucking business. If we allow these people to come into our country, bringing cargo that we in America have, and can supply, then we are saying that the American working people are not needed, and have lost all say to legally enforced DOT (Department of Transportation) laws.Read More



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