Bailout? Or Bargain?

(Is it me, or does Tim Geithner look a little troll-like?)

It irritated me (too) when we had to bail out the big banks. I hated the idea and the practice of rescuing the highly educated but utterly irresponsible a$$holes who were so careless and cavalier with other people's money.

I hated that more than I would have hated bailing out someone less educated, less sophisticated, and less calculating. But there are two important lessons to take from this Big Bank Bailout that we can use to make our lives easier and, dare I say, more zen.

(Side note: I'm not sure who should be embarrassed by this issue, geographically speaking. Washington, DC for failing to regulate, and in fact repealing in the 1990s regulations that would have prevented a lot of the mess that resulted? Or NYC and the Wall Street shills? Whatever. They can share the shame.)

Lesson One: There is a major difference between being right and doing the right thing. People have such a hard time with this, but it's really very simple. Yes, it would be just and proper to allow the "fraudy" banks to fail when their card houses collapsed. But who gets hurt? The banks, their shareholders, their depositors, and ultimately, the entire economy - i.e. all of us. So, while we may be right that failure was what the banks deserved, letting them fail would not have been the right thing to do.

If you are a parent, you do this every day. "Don't touch that! It will burn you!" When your kid touches it anyway and gets burned, do you stand over her and smirk and say, "See, I told you. Serves you right!"? Of course not. Because that would not be the right thing to do. The right thing to do is to comfort her and bandage the wound. (If you did now already know this last part, I pray to Ra you don't have kids.)

Banks are not children, so there is no love and affection there, but their good health is still in our best interest. So,IMO, we did the right thing when we bailed them out.

If you are not convinced, consider Lesson Two:

WORK-RELATED ANECDOTE: I took the deposition of a rather shady-lady-real-estate-investor several years ago who touted a big, fat balance sheet, drove a beautiful leased Jag, and owed money to half the state of Utah. During the deposition, I asked her the very general question, "What caused you to leave your job and begin investing in real estate?" Her answer was that she had "figured out" a great, new real estate investment business plan. I asked, "What was that?" She said, "Buy low, sell high." (I am not making that up. If you are willing to pay for the copy, I'll send you the transcript.)

Buy low, sell high.

What happened to the banks' stock prices when the crash occurred in 2008? They went down. When the TARP fund was created to bail out the banks, the government took huge chunks of shares as collateral for the loans to the banks. Essentially, the US Government became shareholders in the big banks.

What has happened to the banks' stocks since the bailout and the end of the recession? They have gone up.

Today, it was reported that the Department of the Treasury has sold 20% of its stake in Citigroup - FOR A PROFIT. And they plan to continue to sell Citi shares at a profit in the months ahead. No one talks about this. They just talk about the UTTER INJUSTICE OF REWARDING THE BANKS BLAH BLAH BLAH (see Lesson One).

"Doing the right thing" is called "doing the right thing" because of the result it brings. Being right only gives you the personal satisfaction of being right. But being right and personally satisfied in the midst of a Second Great Depression is not a good result. So, in this instance, being right would not have been the right thing to do. (Does your brain hurt yet?)

So -> Lesson One - Do The Right Thing
Lesson Two - Buy Low, Sell High.

Do we really need to know anything else to get by in this world?