Due to the vague way in which the U.S. $700 billion bailout package was written, just about any company or institution could qualify for assistance simply by deeming that its rescue is “necessary to promote financial market stability.”

We are already seeing this with automobile manufacturers and insurance companies requesting a share of what was originally intended for a financial services bailout package. Even state governments such as New York and New Jersey are calling for a rescue package for state and local governments.

So far, no financial institutions outside of banking, insurance, and automakers has made this request, but airlines and homebuilders are already preparing to argue their case, and if these types of industries receive funding, it will only be a matter of time before other large industries follow suit.

One of the original claims regarding this bailout was that the government (and by extension, the taxpayer) would get their money back as mortgages and investments are sold later on the open market at a profit, or at a minimum loss. But if the automobile, airline, and housing industries get a share of the bailout, what provisions have been made that the government will ever see any of that money paid back?

This is the greatest fallacy of the bailout package. It was put together and voted through so quickly that nobody seemed to pay any attention to the details. There were an awful lot of uncrossed T’s and un-dotted I’s involved, and this may come back to haunt us if the package is allowed to expand its scope in this manner.

Before participation in the bailout package gets fully into swing, it is imperative that the legislature revise the package and fill in those gaps to better define exactly who qualifies, and how the funds will eventually be paid back. Otherwise, it is just a matter of taking money from one pocket and putting it into another, with that second pocket containing a large hole in the bottom.

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Entry was posted on Thursday, October 30th, 2008 at 2:06 pm under Opinion.

Read more entries by Todd Eastman.
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