When is a bailout not a bailout?

[MiddleClassCentrist]

It was only a 19% raise on average, while people complain that labour and unions need to make concessions by giving up benefits, pensions, and reduce their wages.

The only thing that gives me hope is that it's completely unsustainable. Labour and management need to be a balanced equation. If they keep taking from labour, there will be no customer base left and the economy will go belly up. Then people like Kevin O'Leary will scratch that fat bald heads wondering what the hell happened and inevitably blame labour in some way.

Conservative/austerity ideologues don't get it, and never will get it.

[westguy]

They didn't need to "save" anything. As I recall Joe Flatularity let it slip, that the problems in the US did not affect banks in Canada, that our banks were in great shape. However he didn't say why, but those who pay attention knew it was because of years of fiscal restraint by Paul Martin, who asked Canadians to "tighten their belts" to pay down the deficit. We the taxpayer had to pay that sacrifice to put Canada in the lead financially. We payed the price, but we didn't get to reap the rewards.

Very next day the Harper government made the statement that there WAS a problem, and the government was going to have to make appropriate amends to save the economy. If you didn't smell shit at that moment you must have your head buried. Because fact is, Canadian banks were "envious" of the handouts being given their competitors after the same had been so fiscally irresponsible. Canadian banks wanted their handout too, despite the fact they never needed it.

Meanwhile CPC supporters couldn't shut their festering gobs in making excuses, explaining why this wasn't a bailout and why the government is doing the right thing. Lies. They are not interested in what's best for this country.

the Fiberals reduced the deficit by downlaoding to the provinces

[Argus]

I love the crazy position of conservatives defending welfare and government interference in the markets. F!@# SOCIALISTS!

Funny. I was thinking just the opposite; that this thread is an example of why people on the Left in Canada should never be allowed to have any influence on the economy or budget. Clearly they haven't the faintest understanding of how the economy works, of how business works, or how budgeting works. Instead, this whole thread is based on resentment and anger that the banks made a lot of profits last year.

They don't know, and don't understand, and what's more they don't WANT to. Instead, the Left cherishes its emotional dislike of capitalism and anyone who makes too much money.

And by the way, my own position on the banks is that they have too much power and influence, and need to be drastically reigned in with more competition. I am no friend to the Canadian banks. I see them quite clearly for what they are: amoral profit machines.

[Smallc]

the Fiberals reduced the deficit by downlaoding to the provinces

What a load of revisionist crap.

[Argus]

What a load of revisionist crap.

What did he say which was untrue? The Liberals reduced transfer payments to the provinces, thus forcing the provinces to make the hard decisions on what to cutback in terms of health, education and welfare.

And, of course, they hugely benefited from massive increases to government funding from the GST they had opposed so strenuously.

[GostHacked]

Lame argument. Under that definition, if the banks were selling the govt. gold at $1 an ounce, it would still be a bailout.

The banks did not sell the government anything in order to get the money. And if you are selling gold to get the money, then there seems to be a straight 1 for 1 exchange, certain amount of gold for 1 dollar. But if they had the gold reserves, why the need to get a bailout? The banks are getting the money and they are supposed to pay it back later.

Yes, you are. You're lamenting the banks getting shortchanged by the government AND the government "bailing out" the banks.

If you sell me something for more than it's worth, what is the logical conclusion you would reach?

In this case the banks are not getting shortchanged, it is the banks who will shortchange the government and the taxpayers. your money was used to help with the 'non-bail-out'. Even if the government gets interest on what was lent to the banks, do you really think that the taxpayers will benefit one bit because of it? Have we benefited from it before?

[Michael Hardner]

The banks did not sell the government anything in order to get the money. And if you are selling gold to get the money, then there seems to be a straight 1 for 1 exchange, certain amount of gold for 1 dollar. But if they had the gold reserves, why the need to get a bailout? The banks are getting the money and they are supposed to pay it back later.

No, that's incorrect. It was NOT a loan - please go back and read the thread.

If you sell me something for more than it's worth, what is the logical conclusion you would reach?

That didn't happen either. The banks sold for less than it's worth.

In this case the banks are not getting shortchanged, it is the banks who will shortchange the government and the taxpayers. your money was used to help with the 'non-bail-out'. Even if the government gets interest on what was lent to the banks, do you really think that the taxpayers will benefit one bit because of it? Have we benefited from it before?

Again, you missed the point of this whole thread it seems to me.

[GostHacked]

No, that's incorrect. It was NOT a loan - please go back and read the thread.

I agree it was not a loan. That is why I call it a bail out. If it was a loan, then the bank would pay back interest to whomever the money was borrowed from.

That didn't happen either. The banks sold for less than it's worth.

So what DID happen?

[Michael Hardner]

So what DID happen?

KeepItSimple summarizes it here.

[dre]

Semantics.

THe distinction here is whether it was a bailout of the banks, or a bailout of the financial system / economy.

But when the government dumps public money into the economy its a bailout... whether they do it through the banks, or not, and whether they purchase assets or not. These assets may in fact be a very good investment, but if the purpose of injecting money into the system was to prevent a negative economic outcome its a bailout.

[Michael Hardner]

Semantics.

I don't understand why people use that term - semantics means 'meaning' doesn't it ?

Doesn't the meaning of bailout make a difference here ?

To me, 'bailout' means gift, subsidy - a provision of that sort.

But when the government dumps public money into the economy its a bailout... whether they do it through the banks, or not, and whether they purchase assets or not.

How about whether the government makes money on the deal or not ?

These assets may in fact be a very good investment, but if the purpose of injecting money into the system was to prevent a negative economic outcome its a bailout.

By that definition any government transfer of money, even buying securities at below market value, is a 'bailout'.

[Canuckistani]

I don't understand why people use that term - semantics means 'meaning' doesn't it ?

Doesn't the meaning of bailout make a difference here ?

To me, 'bailout' means gift, subsidy - a provision of that sort.

How about whether the government makes money on the deal or not ?

By that definition any government transfer of money, even buying securities at below market value, is a 'bailout'.

But he has a point. It's not as if the govt is in the habit of buying assets from banks, even if they could make a good buck off them. It's a form of government support, that's for sure. The govt used its credit rating and ability to print money to backstop the banks, or the banks likely would have frozen up. Otherwise the govt would not have intervened. So maybe the headline should say "when is a government intervention in the market place not a socialist act?"

[dre]

I don't understand why people use that term - semantics means 'meaning' doesn't it ?

Doesn't the meaning of bailout make a difference here ?

To me, 'bailout' means gift, subsidy - a provision of that sort.

How about whether the government makes money on the deal or not ?

By that definition any government transfer of money, even buying securities at below market value, is a 'bailout'.

It has to do with the reason why they purchase them though. If they do it because they think they need to, to prevent negative economic consquences its a bailout. If they are doing it to make profit, and would be doing it regardless of concerns about negative economic consequences then its an investment.

The term "bailout" is in reference to boats that are filling up with water. Its something you do because you think the boat will sink if you dont. So it really depends not on the transfer of money itself or what the government gets in exchange, but what their reason for injecting capital was in the first place. Did they do it to make profit on an investment? Or did they do it because they were worried the ship might sink (liquidity would evaporate).

If they did it to maintain liquidity in the system to prevent negative economic consequences... Then its a bailout.

[Michael Hardner]

But he has a point. It's not as if the govt is in the habit of buying assets from banks, even if they could make a good buck off them. It's a form of government support, that's for sure. The govt used its credit rating and ability to print money to backstop the banks, or the banks likely would have frozen up. Otherwise the govt would not have intervened. So maybe the headline should say "when is a government intervention in the market place not a socialist act?"

Absolutely. The financial system almost seized up like an engine without oil. The term 'bailout' though makes one thing of handouts and the disbursements that went to so-called fatcats in the US..

[waldo]

Semantics.

THe distinction here is whether it was a bailout of the banks, or a bailout of the financial system / economy.

But when the government dumps public money into the economy its a bailout... whether they do it through the banks, or not, and whether they purchase assets or not. These assets may in fact be a very good investment, but if the purpose of injecting money into the system was to prevent a negative economic outcome its a bailout.

semantics - exactly...

Those who say this wasn’t a bailout argue Canadian banks had a “liquidity” problem, not a “solvency” problem like the U.S. banks. What this means is that Canadian banks had the collateral needed to get loans to pay their bills, something the U.S. banks didn’t have.

But if the problem was that no one wanted to lend to Canadian banks, as the banks themselves say, then they would have had to sell assets to pay their bills, and pretty soon the banks’ “liquidity” problem would have become a “solvency” problem, just like the U.S. banks.

Without the bailout, the Canadian banks wouldn’t have been able to pay their bills. It’s as simple as that.

[msj]

I bookmarked the linked article a long time ago.

It applies to Canada just as much as to the US.

Yes, Virginia. The banks really were bailed out.

Yes, the Canadian banks were bailed out. Big time.

[bleeding heart]

semantics - exactly...

Those who say this wasn’t a bailout argue Canadian banks had a “liquidity” problem, not a “solvency” problem like the U.S. banks.

It wasn't that they were broke. It was that they would be broke. Big difference, no doubt.

[Michael Hardner]

It has to do with the reason why they purchase them though. If they do it because they think they need to, to prevent negative economic consquences its a bailout. If they are doing it to make profit, and would be doing it regardless of concerns about negative economic consequences then its an investment.

The term "bailout" is in reference to boats that are filling up with water. Its something you do because you think the boat will sink if you dont. So it really depends not on the transfer of money itself or what the government gets in exchange, but what their reason for injecting capital was in the first place. Did they do it to make profit on an investment? Or did they do it because they were worried the ship might sink (liquidity would evaporate).

If they did it to maintain liquidity in the system to prevent negative economic consequences... Then its a bailout.

I get that aspect of it.

But it's not clear that this is not a gift, from the headline. Many, including I, thought that there was a handout involved. Otherwise, this headline:

"Study reveals secret Canadian bank bailout"

Makes no sense. For that matter, it wasn't even a secret - only the details of which banks got how much was a secret. I'm disappointed that this organization would go forward with such a misleading tag line as that.

[Michael Hardner]

It wasn't that they were broke. It was that they would be broke. Big difference, no doubt.

Not broke, just with no cash on hand. Am I wrong here ?

[bleeding heart]

But it's not clear that this is not a gift, from the headline. Many, including I, thought that there was a handout involved. Otherwise, this headline:

"Study reveals secret Canadian bank bailout"

Makes no sense. For that matter, it wasn't even a secret - only the details of which banks got how much was a secret. I'm disappointed that this organization would go forward with such a misleading tag line as that.

Well..."secretive," then, rather than "secret" would have been accurate, I think. Still not too positive.

[Michael Hardner]

Still not too positive.

What isn't positive about it ? Why did they need to point it out as they did, because to me this is only news if there was either 1) a gift from the government or 2) a cover-up of some kind.

[bleeding heart]

What isn't positive about it ? Why did they need to point it out as they did, because to me this is only news if there was either 1) a gift from the government or 2) a cover-up of some kind.

But "secretive"--my (slightly mischievous) proposal, and precisely to which you are responding, is about a cover-up of some kind.

Unless we have no need to see where our tax dollars are going.

Edited June 4, 2012 by bleeding heart

[Michael Hardner]

But "secretive"--my (slightly mischievous) proposal, and precisely to which you are responding, is about a cover-up of some kind.

Unless we have no need to see where our tax dollars are going.

It wasn't a secret - only the proportions of money going to individual banks wasn't known. The overall figure was published.

[dre]

I get that aspect of it.

But it's not clear that this is not a gift, from the headline. Many, including I, thought that there was a handout involved. Otherwise, this headline:

"Study reveals secret Canadian bank bailout"

Makes no sense.

Right. It should have been worded...

"Study reminds us of recent Canadian Economic Bailout"

Really this is just typical garden variety fiat monetary policy. This is quite simply the only tool in the Keynesian playbook. If you are worried about an economic downturn then write a shitload of IOU's against future labor and production, and dump them into the economy as "money", all the while keeping interest rates pegged at near zero.

Fix the recession now, and create a bigger one later once its someone elses problem

This is how the bubble machine works. Same approach they used to combat the bursting of the .com bubble, which of course then fueled the sub prime bubble.

Edited June 4, 2012 by dre

[Michael Hardner]

Right. It should have been worded...

"Study reminds us of recent Canadian Economic Bailout"

Canadian Government Bought Bank Securities to Guarantee Liquidity

Really this is just typical garden variety fiat monetary policy. This is quite simply the only tool in the Keynesian playbook. If you are worried about an economic downturn then write a shitload of IOU's against future labor and production, and dump them into the economy as "money", all the while keeping interest rates pegged at near zero.

It was a once-in-a-generation banking crisis, not just a downturn. There were no IOUs...

Fix the recession now, and create a bigger one later once its someone elses problem

This is how the bubble machine works. Same approach they used to combat the bursting of the .com bubble, which of course then fueled the sub prime bubble.

No money was lent, no future debt was incurred, interest rates weren't changed....

Seriously, you should be more careful of what you write. I'm a complete neophyte in economics and I catch these things in your posts.