Bailouts Sending Unemployed to Money Lenders

Bailouts Sending Unemployed to Money Lenders

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GMAC in Trouble?

The troubled auto lender GMAC needs more money, like everyone else does today, but on the last day of the decade; the federal government has agreed to bail them out with an additional $3.8 billion. This government is certainly kind, because even as they raise taxes and cut jobs, they have no qualms about giving big handouts to mismanaged companies. This comes at a time when unemployment benefits are needing to be reduced, sending the unemployed to money lenders for more loans.

GMAC Not the First

The troubled auto lender is not the first beneficiaries of a bailout. Bigger conglomerates such as Citigroup, Bank of America, General Motors and the insurance giant, American International Group, have all been getting bailouts. GMAC has already received $12.5 billion in federal aid as it grappled to hold itself together, but now, word has come out that they will get a further $3.8 billion from the government to help them stay afloat. As people read the news, or hear it on TV, they may begin to wonder if this mess will ever be sorted out. There was hope on Christmas Eve when the major banks decided to return the money they received, and there was even optimism that perhaps the worst was coming to an end. Banks had their reasons when they decided to return money received as a bailout. This was not money; they had received as loans from money lenders. This was a bailout provided by the federal government. Now comes the GMAC news on the eve of a decade change. Is this the end or the beginning?

Reason to Worry

The federal government has its reasons for offering the massive aid package to GMAC. As one of the largest money lenders to General Motors and Chrysler dealers for their customers, there is every reason to keep GMAC running. Attempts by GMAC to raise private capital on their own had failed, after which they approached the federal government. The question that now must be asked is: why do these companies not have to provide credit checks like everyone else? What is it that makes these companies eligible for federal aid coming from the taxpayer’s money, while the taxpayer himself must run to a money lender for a loan? While the tax payer will not definitely like it, they can take solace in the fact that there none of the aid is being spent on high wage executive salaries.

Things Need to Change NOW

The federal government will soon reach a position where they will have to call off further bailout packages and raise taxes to cover for the financial deficits of the major companies they have funded. They may be doing a good job at the moment in trying to shore up the weaker of these companies, but whether this will be enough will remain to be seen. Major changes cannot be expected though. With the economy recovering at just 2.2%, and unemployment figures expected to stay at 10%, the government will soon be helpless. They will have to bring in additional levies which will be a burden on the tax payer, but great business for the money lenders in times of acute recession.

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