Liz-Vision

  • January 16, 2009 12:59 PM EST by Liz Claman

    "There is No Alternative."

    That's what Dan Veru of Palisade Capital Management said on "Countdown to the Closing Bell" yesterday when I asked him if he was comfortable with the U.S. taxpayer granting yet another $20 Billion dollars to Bank of America (BAC) to help it swallow its somewhat rancid purchase of Merrill Lynch.

    Dan's point is that we need a healthy banking system and no matter what the cost, there is no alternative. He feels that people need to have confidence in their banking accounts and banks need to get back on two feet and start lending more generously. Without that, we're in big trouble.

    I see his point, but it's not like you and I were given a choice here. TARP money was shoveled over to BAC and we found out about it after the fact.  This on the same day the Obama stimulus package was unveiled... an $825 Billion dollar behemoth that includes $250 Billion in tax relief.  Here's what's interesting: the "Everyone Gets a Trophy" pee-wee soccer theory that's been extended to Banks-Behaving-Badly gets cut off when it comes to business tax relief in this package. 

    While businesses would get bonus depreciating for investing in things like new equipment and capital expenditures, and companies that sustain losses this year will get refunds for taxes paid back as far as '03, the catch is this: BUSINESSES WHO HAVE TAPPED THE TARP ARE INELIGIBLE FOR THE TAX PROVISION.  Translation: Ford (F)  can benefit from the tax relief but GM (GM) can't.  Bank of America is shut out, yet New Alliance bank is free to capitalize on the tax cuts.

    I know it may seem like a small victory, but at least there's *some* punishment extended to those who made major mistakes and are using taxpayer dollars to cover the crime. 

    Your thoughts?

    --Liz

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Patrick Norton

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January 17, 2009 at 8:53 pm

carlcr

"No matter what the cost?" Not even if the cost turns into hyper-inflation for all of America? Many Americans feel something needs to be done. Why not let the bad economic situation work itself out over time instead of throwing so many billions of dollars at it. It may already be too late. By doing what we are doing with all of those hundreds of billions of dollars for "bail outs" we will be de-valuing the US dollar. And by so doing, and over time, it seems to me that we are heading toward the natural economic reaction of inflation. Further, because of how many billions the government has "thrown at the problem," and how many billions it is planning on doing so in the months ahead, we may be looking at hyper-inflation in a year or so. Either way, at this point we are looking at bad situation because the dollar will be devalued against foreign currency.

January 16, 2009 at 11:24 pm

Max

The fact that we are following in Japan's footsteps, a government borrowing/bailout pattern initiated in Japan after 1989, suggest that by 2029 our economy will have made about as much progress as Japan between 1989 and now. As Albert Einstein once said, if you repeat the same experiment twice, in the same way, you should not expect to get different results.

January 16, 2009 at 3:46 pm

about this blog

  • Liz Claman joined FOX Business Network (FBN) as an anchor in October 2007. Her debut included an exclusive interview with Berkshire Hathaway CEO and legendary investor Warren Buffett.

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