Understanding the Law
February 6, 2009
Bail Out

Bail outs are contrary to the spirit of capitalism. The rationale for the capitalist system is competition and when businesses are unable to compete they fall into bankruptcy or receivership. But it is not unusual for government intervention by way of bail out in times of crisis.{{more}} In capitalist America the situation had become so dire that in October 2008 the Government intervened with a hefty bail out to save some banks and an insurance company from extinction, not the home owners who suffered from the subprime mortgage crisis. No sooner was this done that other companies, including the porn industry, began to call for bail out. The CEOs of the auto industry flew to Washington in their expensive jets to lay their begging bowls before Congress. So while taxpayers’ money is used to aid the capitalist giants on the verge of collapse, taxpayers in similar circumstances have had to succumb to bankruptcy.


The object of Government’s intervention was to end the credit crunch, but the money was mismanaged and misused under the watch of a Republican administration. Wall Street bankers paid out some $20 million in bonuses to their top officials. In fact, one of the recipients of bail out money proceeded to send its top officials to a retreat at an expensive luxury resort where no expense was spared. The same institution disguised the bonuses to their CEOs, claiming that it was payment intended to keep valuable workers on the establishment.

Stimulus package

When the US economy fell into depression in 1929, President Franklin D. Roosevelt introduced his “New Deal” programme with a great amount of government spending on projects between 1933 and 1936. The new President has similar vision for an injection of capital as the way to save the economy from total destruction. People are not spending and are hoarding their monies for fear of the worst. President Obama knows that for its resuscitation the economy must be given the kiss of life and that is what he hopes to do with his stimulus package.


The President sought the support of Republican with the hope of bipartisan cooperation, but the Republicans would not budge neither would they change their politics even though the economy is bleeding. They continue to espouse the same policy that caused the economic crisis and they are bent on piercing holes in the stimulus package. They would only support the plan if there is a tax cut for big business and the wealthy because they believe that the wealth would trickle down to those in the lower rung, even though it didn’t happen for the last eight years. They dismissed the stimulus package as “pork”, “pet project” “ear mark” intended to benefit constituents. Not one Republican voted in favor of the package in the House of Representative. One conservative talk show host openly declared that he hopes that the president fails. Despite mass unemployment and widespread foreclosures, the Republicans prefer to wait for the economy to correct itself with the interplay of capitalist forces.


Immediate action similar to that in 1933 must be taken to revive the ailing economy. The stimulus package must be properly managed and supervised. The housing problem needs to be fixed. Corporate greed and waste must come to an end. An efficient banking system must be restored. The world economy is dependent on a vibrant US economy, not Republican nitpicking. A bail out is an urgent and necessary antidote for a dislocated ailing capitalist economy.

Ada Johnson is a solicitor and barrister-at-law.
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