03/18/2010 05:12 am ET | Updated May 25, 2011

Knocking Down The Biggest Excuse For The Bailout

Everyone's heard it a hundred times by now. Joe Biden said it when he was on The Daily Show last week. Tim Geithner says it every time he's on television or in a congressional hearing or in the car talking to himself. "We had to do the bailout. We didn't have a choice. The economy would have collapsed. What else could we do? It was unpleasant, but we had to bailout the largest banks."

Now, some might disagree with that. I don't. I agree we had to do something, and if we hadn't the economy probably would have cratered. But that's not the question or the problem at hand. The problem is how they did the bailouts. Namely, by giving away the store.

The government's own inspector general of the TARP program says that we gave away $62 billion we probably shouldn't have - and will probably never get back. Anyone with any degree of sanity now realizes giving away this money to AIG counter-parties at hundred cents on the dollar was either crazy or complicitous. This was taxpayer money funneled to the largest banks in the world to cover their ill-conceived bets that would have never netted them their whole money back on the open market. If capitalism had prevailed, they would have gotten burned on most of that money. Instead cronyism reigned and they got every penny - from us.

To add insult to injury, Goldman Sachs says they didn't need that money from us, that they were covered no matter what because of other bets that they had out in the market. Great. Then give us our money back ($12.9 billion went to Goldman through AIG) and go collect on your other bets. Why the hell did we pay you if you claim you could have gotten that money from elsewhere? Tim Geithner told me we absolutely had to pay you otherwise the world was going to blow up.

The Obama team has burned a lot of goodwill doing this hideous giveaway to the same financial companies that caused this economic meltdown (at least for the rest of us since the bank executives are back to making huge bonuses). If they want to earn some of that goodwill back, they have to do better than the lame excuse of "we had to do it." You didn't have to do it this way. There were many other possibilities. You could have at least structured it so that if the banks went back to making money that we received a fair share for bailing them out - any rational investor would have. You wouldn't have covered up the biggest giveaway by funneling it through AIG (and not even letting us know in the beginning who you were giving the money, too).

It's about time they explain why they chose to do it this way - where the banks got every penny they wanted and we got left holding the bill. If Tim Geithner doesn't have a reasonable answer for that soon, the populist anger calling for his job is going to be perfectly justified.

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