One of the guests on Meet the Press this morning defended the current round of bonuses by saying the people just don't understand that the bailout did not fund the bonuses. All this "populism" on the part of outraged Democrats is, therefore, out of hand. The money, it was claimed, did not go directly from Treasury or the Fed to Wall Street's personal accounts.
But, in fact, for all intents and purposes, yes it did. The money did not go directly into the bankers' personal accounts, no. But all the bailout efforts did stem what would have been far more damage -- much bigger losses on Wall Street, at banks, and at hedge funds. In particular, the Fed's actions to shore up the commercial paper market and the money market funds, and to take as collateral all kinds of debt to supply reserves, reduced further losses on the Street, enabled some markets to function, and provided the potential for some to profit. It probably even kept stocks from falling farther.
Just ask yourself this. Would there have been all that money around to pay the huge bonuses this year had the Treasury and the Fed not stepped in with hundreds of billions of dollars? Of course not.
And that is why everyone is angry. With good reason. The bonuses, despite claims otherwise, were indeed a shame.