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By now, we should really be concerned about the immorality of it all. AmEx is one of the richest corporations in the world, serving mostly well-to-do clientele.

By now, we should really be concerned about the immorality of it all. AmEx is one of the richest corporations in the world, serving mostly well-to-do clientele. On what moral basis do they get this aid? What is wrong with letting them do the write-off, fail if necessary? On what moral basis can the same government deny <name-your-company> aid? So why not Circuit City? Why not Mervyns - I was there at a closing-store sale yesterday, the employee's faces told me everything. I am not advocating bailing out any of them, but if AmEx is OK to bail out, why not Mervyns? Is it because the Mervyns employees are a lower breed of human? It is making my blood boil.

mdasen 18y ago
Well, first, what is aid? The big problem is that everyone is using the word "bailout". That makes one think of free money that doesn't have to be paid back. That isn't the case. Yes, if the firms still fail after receiving the government assistance, they won't pay back what amounts more to a loan than a bailout. So, yes, taxpayers can loose, but it isn't a bailout so much as an emergency loan program. Both Circuit City and Mervyns have been dying for years. Mervyns has been shuttering stores for several years and went through a failed turn-around attempt. Circuit City simply couldn't compete with Best Buy. They didn't have sound businesses. The big difference between a place like Circuit City and American Express is the amount that would be needed to overcome a blip. Circuit City, if it had a sound business model, might need a loan of a hundred million or so to keep paying salaries and such through a downturn. American Express needs to keep lending money - and all financial firms lend more money than their company is worth. They're intermediaries. So, Circuit City can go to a bank (or several) and get the cash they need if it would save their business. American Express can't. They need cash on a scale that Circuit City doesn't. I understand why so many are outraged. It looks like a firesale of your tax dollars to a few firms. That isn't the case. If these firms make it (and based on their business models they will), the government will actually make money. Circuit City and Mervyns were just failing firms. Many in the financial sector have sound business models that need some cash for a year or two (in amounts that they can't raise from sources other than the government) because there was a perfect storm of credit conditions.
- anamax 18y ago
  > If these firms make it (and based on their business models they will), The fact that Amex can't get private investment says that the smart money thinks that they're a dumb bet. (There tons of money around. Buffet isn't the only one snapping up actual bargains.) It may be that the Amex biz model works but Amex the company can't do it. In that case, the loan is a dumb idea. Let someone else pay to take a shot at it. Feel free to invest your money, to get together with others if need be. If you're right, you make out. If you're wrong, I don't lose.
  - quellhorst 18y ago
    One of Buffet's largest holdings is Amex.
    - anamax 18y ago
      If Buffet doesn't think that Amex is worth any more of his money, why is it worth any of mine?
  - rgr 18y ago
    Smart money seems to be in great scarcity these days. Those so called smart Wall St firms are the first to line up for tax dollar handouts. Those firms that should be in chapter 11 right now for their stupidity are the ones you and I are now involuntarily working for by proxy of our government.
- startingup 18y ago
  I was using Circuit City & Mervyns as strawmen examples. Realize that AmEx employees are some of the highest paid in America, while Mervyns' people are among the lowest paid. A government loan (by definition on more favorable terms than what they can get in the market) to AmEx is inevitably a subsidy to those high paid employees. Mervyns having to raise funds at 15% or 25% or whatever loan-shark terms they could get - yes, entirely their own fault - means that by extension, their low paid employees have to bear that interest burden on the company. Why should we the taxpayer subsidize AmEx? Why not let the do the write down of their bad assets? In what sense Mervyn's management mistakes more punishment worthy than AmEx management mistakes? Here is a modest proposal: any company requesting a government loan should accept civil service pay rules for their employees. Would AmEx employees put up with it? They can get the fuck out of they don't like those terms and find real private sector employment.

mdasen 18y ago

Well, first, what is aid? The big problem is that everyone is using the word "bailout". That makes one think of free money that doesn't have to be paid back. That isn't the case. Yes, if the firms still fail after receiving the government assistance, they won't pay back what amounts more to a loan than a bailout. So, yes, taxpayers can loose, but it isn't a bailout so much as an emergency loan program. Both Circuit City and Mervyns have been dying for years. Mervyns has been shuttering stores for several years and went through a failed turn-around attempt. Circuit City simply couldn't compete with Best Buy. They didn't have sound businesses. The big difference between a place like Circuit City and American Express is the amount that would be needed to overcome a blip. Circuit City, if it had a sound business model, might need a loan of a hundred million or so to keep paying salaries and such through a downturn. American Express needs to keep lending money - and all financial firms lend more money than their company is worth. They're intermediaries. So, Circuit City can go to a bank (or several) and get the cash they need if it would save their business. American Express can't. They need cash on a scale that Circuit City doesn't. I understand why so many are outraged. It looks like a firesale of your tax dollars to a few firms. That isn't the case. If these firms make it (and based on their business models they will), the government will actually make money. Circuit City and Mervyns were just failing firms. Many in the financial sector have sound business models that need some cash for a year or two (in amounts that they can't raise from sources other than the government) because there was a perfect storm of credit conditions.

anamax 18y ago
> If these firms make it (and based on their business models they will), The fact that Amex can't get private investment says that the smart money thinks that they're a dumb bet. (There tons of money around. Buffet isn't the only one snapping up actual bargains.) It may be that the Amex biz model works but Amex the company can't do it. In that case, the loan is a dumb idea. Let someone else pay to take a shot at it. Feel free to invest your money, to get together with others if need be. If you're right, you make out. If you're wrong, I don't lose.
- quellhorst 18y ago
  One of Buffet's largest holdings is Amex.
  - anamax 18y ago
    If Buffet doesn't think that Amex is worth any more of his money, why is it worth any of mine?
- rgr 18y ago
  Smart money seems to be in great scarcity these days. Those so called smart Wall St firms are the first to line up for tax dollar handouts. Those firms that should be in chapter 11 right now for their stupidity are the ones you and I are now involuntarily working for by proxy of our government.
startingup 18y ago
I was using Circuit City & Mervyns as strawmen examples. Realize that AmEx employees are some of the highest paid in America, while Mervyns' people are among the lowest paid. A government loan (by definition on more favorable terms than what they can get in the market) to AmEx is inevitably a subsidy to those high paid employees. Mervyns having to raise funds at 15% or 25% or whatever loan-shark terms they could get - yes, entirely their own fault - means that by extension, their low paid employees have to bear that interest burden on the company. Why should we the taxpayer subsidize AmEx? Why not let the do the write down of their bad assets? In what sense Mervyn's management mistakes more punishment worthy than AmEx management mistakes? Here is a modest proposal: any company requesting a government loan should accept civil service pay rules for their employees. Would AmEx employees put up with it? They can get the fuck out of they don't like those terms and find real private sector employment.