What is the mechanism behind a bailout?

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kemosavvy's picture
Status: Martenson Brigade Member (Offline)
Joined: Oct 13 2008
Posts: 254
What is the mechanism behind a bailout?

I recently gave a presentation on my argument against the Fed.

You can check out the video I put together here

My main point is that our country has centralized the power of monetary policy into the hands of a few, an almost irrefutable fact. What I encountered were strawman arguments attacking my underlying info. One question that caused me to pause was that the bailouts are a function of the treasury and not the Fed, like I stated.

Is this true? Are the bailouts a function of the Treasury?

The way I see it is the Treasury does not have the money to fund a bailout, so it issues bonds or has the Fed print up the money, therefore the bailout is suggested by the Treasury, decided upon by the Congress adn funded by the Fed.

Your thoughts?


strabes's picture
Status: Diamond Member (Offline)
Joined: Feb 7 2009
Posts: 1032
Re: What is the mechanism behind a bailout?

I guess the questioner is limiting his definition of "bailout" strictly to TARP.  Technically yes, that's a Treasury program.  But far more has been done that should be bucketed under "bailout."  The Fed's TALF is an example.  

More importantly, Treasury is told what to do by the Fed and the banking system.  Otherwise Treasury would've relieved indebted citizens rather than paying off the banking system.  Treasury is the mechanism by which the Fed and the banking system pass worthless crap onto the taxpayers' balance sheet.  And considering that Geithner was NY Fed and Paulson was Goldman, Fed and Treasury are really the same people making the decisions.  The difference is that whatever Treasury does directly sticks it to the American taxpayer.  What the Fed does is hidden for a while in the banking system until solvency, liquidity, currency, inflation/deflation problems hit taxpayers' wallets.

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