The Bailout Failure

(Newser) - Congress' plan to bail out Detroit ignores one fundamental problem: Americans owe so much on their current cars—often more than the vehicles are worth—that they can't buy new ones, writes Stephanie Mencimer in Mother Jones . Detroit—along with the "great scourge of the American consumer market: the car dealer"—makes its real money selling not cars but dodgy loans. The result: negative equity for consumers, the same problem vexing the housing industry. More »

(Newser) - With Nissan, Toyota, Volkswagen and other foreign factories dotting the I-65 corridor stretching from Kentucky to Alabama, southern Republican senators relished this week's chance to take a swing at Detroit and the UAW simultaneously. The "bailout fell victim to a nasty confluence of home-state economic interests and anti-union sentiment," write Alex Koppelman and Mike Madden in Salon. Here are some of the big players: More »

(Newser) - Insurance giant AIG, already the recipient of a $150 billion government bailout to cover soured credit-default swaps, now admits it owes some $10 billion more for speculative trades it made with its own money, reports the Wall Street Journal . Those deals aren’t covered by the bailout, leaving the struggling insurer looking for ways to cover its losses. More »

(Newser) - This financial crisis brewed over decades of bad decisions, and, in Vanity Fair, economist Joseph Stiglitz makes sure credit is given where due: In 1987 President Reagan appointed anti-regulation Alan Greenspan to a regulatory post. Greenspan offered the markets a "flood of liquidity" that boosted inflation and caused two financial bubbles. The Glass-Steagall Act was repealed in 1999, allowing commercial banks to become high-risk borrowers. More »

(Newser) - Growing tension between the Bush administration and its replacement is making the waters of the economic turmoil more uncertain, the Wall Street Journal reports. With the first half of the  $700 billion bailout fund nearly gone, the White House wants more input for Barack Obama on securing the next $350 billion; the Democrat is more focused on his own stimulus plan. More »

(Newser) - A survey of more than 400 financial institutions found a large percentage are reluctant to participate in the $700 billion bailout program because of confusion, the Wall Street Journal reports. As Treasury hastily shifted gears from the original plan to buy toxic debt to taking equity positions in banks, more than nine in 10 firms said a “lack of clarity” has kept them from participating. More »

(Newser) - Investor and public pressure could prompt up to 1800 more financial institutions, both publicly and privately held, to apply for a share of the $700 billion bailout fund, the Wall Street Journal reports. The cash-grab likely stems from fear that failing to do so would make an institution look like it wasn’t savvy enough to take advantage of the potential windfall or healthy enough to qualify. More »

(Newser) - The government’s $143 billion bailout of AIG is looking more and more like an expensive example of good money following bad, as financial experts are concluding that bankruptcy would have been better for both the insurance giant and taxpayers, reports the Washington Post. AIG has burned through more than $90 billion in government funds, but AIG’s mortgage holdings continue to deteriorate—along with the value of its related holdings.