I’ve been laughing at this one ever since I got the Google Alert on it. I kid you not, from the Mankato Free Press:
U.S. Sen. Norm Coleman said the massive government bailout of failing financial institutions is not only necessary but could make money for the federal government.
“The government could make 10 or 20 times what it pays on this, possibly,” Coleman said during a campaign stop at Christy’s Cafe in North Mankato Saturday morning.
Coleman said the government takeover of Freddie Mac, Fannie Mae, AIG and others was necessary but said “I worry a little bit,” about the government spending perhaps a trillion dollars or more to shore up failing financial institutions.
That’s demonstrating a whole heck of a lot of intelligence about Wall Street. Amazing, Coleman’s naïve perspective. Ouch. From the Politico last night:
Many analysts believe the government could ultimately make money from some of the toxic assets it collects — but that could be years down the road and no one (that we know) has produced such a rosy estimate.
If Coleman was, in fact, referring to the $700 million upfront cost as his statement suggests, the U.S. government would make $7 to $14 trillion off the worst financial crisis since the Great Depression.
This is essentially proof of Coleman not having any real understanding of this incredibly serious problem as well as the fact he’s just pushing around talking points. A major embarrassment.
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I think I know where he got the idea. It is the line being used by Barney Frank(D), the current chair of the House Financial Services Committee. Don’t get me wrong, I think both of them are completely full of it.
KH — I can’t find that line, at least not from Rep. Frank. Do you have a link?
It was on NPR yesterday evening.
Here is the core of his thinking.
http://www.latimes.com/news/nationworld/nation/la-fi-bailout23-2008sep23,0,4842932.story?page=2
“If the bailout works, the bill ultimately paid by taxpayers would be considerably lower than the initial outlay of as much as $700 billion to buy mortgages and mortgage-backed securities, Frank and independent economists said. That’s because the government would be paying fire-sale prices and could eventually sell many of the securities, perhaps at a profit depending on how the housing market fares in the years ahead.”
His snippet on NPR was a bit more enthusiastic though neither is as far over the top as Coleman’s. But my guess is that given Franks position Coleman isn’t so terribly far off what will be the Democrats reasoning line moving forward. That the bailout is good and the feds are smart enough to make money on a deal where Wall Street failed.
Thanks for the link. I agree, this is over-the-top.
I thought the whole justification for the bailout was that it would be catstrophic to do nothing. That is plausible, if arguable. I cannot believe that it will be a money-maker, though. If it’s such a wise and profitable investment, why has the private sector not swooped in?
I’ve heard Amway reps make a more convincing pitch.
If I was going to be paid money for garbage, I would be certain that there was no gold or silver in the trash… but with the way Wall Street has handled themselves lately there might be something of value in their discards. I wouldn’t count on it but hey stranger things have happened. The vast majority is going to be paper backed with nothing at high commission.
There’s an essential difference, I think, between Frank’s comments and Coleman’s. What Frank is saying is that we will almost inevitably find some good paper amongst all the crap we buy. We’ll be able to make a good deal of money on that — we will still spend hundreds of billions of dollars, but it won’t be the full $700 billion.
What Coleman is saying is that the government will be able to turn a profit. I suppose that’s technically possible, but it’s much more likely that I’ll win the Nobel Peace Prize.