Here’s how it would work in a Chapter 11 if this were any other industry: all the equity would be wiped out, then the creditors would get a percentage on the dollar,” she said. “We would totally protect all the deposit accounts, and the rest of the debt would get some combination of stock and pennies on the dollar. The minute that happens, the banks are solvent, and new capital can flow in.”
Someone said to me, You’re describing ripping the Band-Aid off all at once, and we’re saying how ‘bout we just keep peeling the corners off a little at a time — ouchy, ouchy, ouchy — and maybe we can adjust as we go along. [In the early 90’s,] Sweden ripped the Band-Aid off all at once, and Japan took ten years. But the Band-Aid had to come off.
Who are we trying to protect here? Is it a banking system that is in service to American families and the economy, or is it the American families and the economy in service to a banking system? I know what I think the answer should be.”
The biggest taker of banking bailout money, AIG — getting $40B of TARP money in November, plus $43B from its own special bailout fund and $38B in loan money — is now in line to get another $30B from TARP.x63 Ouchy, ouchy, ouchy.
The American economy is the envy of the world, and we need to keep it that way, Bush said. “The fundamentals of our economy are strong … Job creation is strong. Real after-tax wages are on the rise. Inflation is low.”
“The fundamentals are strong,” Bush said. “We’re just in a rough patch, witnessed by the unemployment figures today.”
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Beyond the $700 billion bailout known as TARP, which has been used to prop up banks and car companies, the government has created an array of other programs to provide support to the struggling financial system. Through March 2, the government has made commitments of nearly $9 trillion and spent $2.1 trillion. Here is an overview, organized by the role the government has assumed in each case.