Oh No, Not Another Bailout!

By engaging in bailout after bailout, government bureaucrats subsidize failed but well-connected losers by effectively confiscating the necessary resources from productive and successful members of the economy. Ron Paul explains why such bailouts are a bad idea and why we should allow the natural incentives and regulations of the free market to pick the winners and losers in our economy.

The Bailout Surge

by Ron Paul

[Last] week the bailout of the Big Three automakers was under heavy consideration in Congress’s lame duck session. I have always opposed government bailouts of private organizations. Back in 1979 Congress had hearings about bailing out Chrysler and I was on record pointing out that these types of policies are foolish and very damaging to the long term economic health of our country. They still are.

There was also renewed pressure [last] week to bailout homeowners and send another round of stimulus checks to “Main Street” to balance out all the handouts to big business. It seems that eventually the entire economy is going to be blanketed over with Federal Reserve notes. Most in Washington are completely oblivious as to why this model of money creation and spending is so dangerous.

We must remember that governments do not produce anything. Their only resources come from producers in the economy through such means as inflation and taxation. The government has an obligation to be good stewards of these resources. In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me.

With each bailout we hear rhetoric that this is the mother of all bailouts. This will fix the problem once and for all, and that this is absolutely necessary to avert disaster. This sense of panic squeezes astonishing amounts of dollars out of reluctant but hopeful legislators, who hate the position they are being put in, but are relieved that it will be the last time. It is never the last time, and again and again we are faced with the same scenarios and the same fears. We are already in the bailout business for such a staggering amount that admitting it was wrong in the first place would be too embarrassing. So the commitment to this course of action is only irrationally escalated, in the hopes that somehow, someway eventually it will work and those in power won’t have to admit they were wrong.

It won’t work. It can’t work. We need to cut our losses and get back on course. There is too much at stake for too many people to continue down this road. The bailouts thus far to AIG, Bear Stearns, Fannie and Freddie, and TARP funds amount to around $1.5 trillion. Considering our GDP is $14 trillion, and our Federal budget is already $3 trillion, this additional amount will significantly eat into our future lifestyles. That amounts to an extra $5,000 that every person in the country needs to somehow produce just to keep up. It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.


  • Aaron Davis

    Uh, with all due respect, Dr. Paul respected Ronald Reagan and actually worked to support his campaign to win the Texas republican delegation for president. They saw eye to eye on quite a few things, and had a mutual respect. Reagan believed that Libertarian values were at the core of the republican party, and that folks like Paul were a very necessary voice that needs to be heard in Govt.

    It’s well documented. Reagan’s been quoted several times speaking kindly about Ron Paul. Talk about not doing your research!

    Here’s a crowbar, use it on the foot stuck in your mouth… DOH!


    • dtknapp

      Aaron it seems as though Matt has spotted that oddly shaped birthmark on your back…Is it a bulls eye?..hahaha I am a 30 yr old that is living in his 2nd home already..I am one of those people you spoke of in a previous post that didn’t have the 20% downpayment so I took the 6% seller contribution. I can say this though, the people spending more than they have isn’t exaclty our fault, it took many years of planning for this to happen. We were enabled to do this for good reason. Do you think any of the original members of the Fed could forsee this happening? It’s a joke once you know when the seed was planted. I just hope my 401K holds it’s own in this tough time…Oh wait! It’s with J.P. Morgan…it will be fine…lol History seemed really boring in school, but know it’s light has changed, to all who have any doubt about Dr. Paul’s ideas, pick up a book, read about our nations economic history, it tells tales of which were living today…….

  • Matthew Stone

    OMG this totally reminds me of Ron Paul back in the 80’s! I think he would have hated Reagen and Volcker (who was a Carter apointee fyi).

    Even a broken clock is…

    I know ‘long term’ he was totally right (as everyone here seems to agree), but man, you peeps ever do your research?

    Ron Paul, circa terrible call. Not only did he not see volcker, but he failed to see Reagan? Soooo Volcker broke the back of inflation, where was the free market then? Oh wait, it was getting ready to screw over someone else? Or maybe be more efficient!

    Check out his paper FROM 1981:

    “Impending Social Strife?
    The greatest threat facing middle and working class Americans
    is our depreciating paper currency.”

    “We probably will see widespread civil disorder in the 1980s,
    as a direct result of our faltering economic system.”


    OMG the 80’s were terrible, fraught with “widespread civil disorder”. That was soooooo prescient. Thanks for admitting your prescience, or lack thereof. Or even any humility. At all.

    Two decades later.

    – Matt

  • longshotlouie

    Matthew Stone replies:
    December 8th, 2008 at 9:21 pm


    Errr, since rules and oversight are so rad, shouldn’t it also be a good idea then to audit the ‘EVERYONE ELSES’ balance sheets to make sure they aren’t borrowing beyond their means?

    Last I heard it wasn’t the fed’s balance sheet that screwed things up, it was ‘EVERYONE ELSE’buying stuff they couldn’t afford at inflated prices?

    Where is the personal accountability here?!?!

    Errr, it’s the ‘last I heard’ part that is causing you a problem.

    Turn off the MSM

  • Will

    Id say if we really had to, give the american taxpayers all that money to buy an “American” car and then the car companies would still have to pay us back. Now that’s something somewhat better then giving them an outright loan.

  • Guy Garofano

    I think we have to remember what many of the Founding Fathers said in one way or another, which is that the form of government and society they envisioned only works with a moral and educated (or I will say intelligent) citizenry. None of us here want all this government intervention in the economy – but if we have business leaders who are corrupt, or overly greedy, or just plain dumb sometimes we are going to get just what we don’t want. We can’t turn back the clock to the 1840’s or whatever. Most people today may not want socialism, but they also don’t want a free enterprise system that sells out the good of the country in the name of short terms profits, etc. If they see that (or think they see it) they are going to look to the government.

  • J Wells

    Enormous positive opportunity to release suppressed technology

    I just finished reading the below link. It is the best option I have heard in a very long time regarding the automotive industry bailout.

    Please read


    Best regards

    J Wells

  • hmmm


    read this. they says fed was audited… whats up?

    • Aaron Davis

      I don’t doubt that the Fed was/is audited regularly. The problem with the Fed Reserve (for me anyway) isn’t it’s operational budget, nor fear that they are skimming money into some secret coffer somewhere, but rather, the policies they implement which effects EVERYONE ELSES operational budgets (yours and mine, that is), and the purchasing and financing power of the average American.

      If we audited the U.S.’s solvency caused or lost by the policies and principles implemented by the Federal Reserve since it’s founding, then we would actually find something objectionable, but THIS type of an audit is not done because it’s too complicated, even for them.

      • Matthew Stone


        Errr, since rules and oversight are so rad, shouldn’t it also be a good idea then to audit the ‘EVERYONE ELSES’ balance sheets to make sure they aren’t borrowing beyond their means?

        Last I heard it wasn’t the fed’s balance sheet that screwed things up, it was ‘EVERYONE ELSE’buying stuff they couldn’t afford at inflated prices?

        Where is the personal accountability here?!?!

        • Aaron Davis

          Oh I totally agree Matthew. Don’t mistake my desire to expose how the federal reserve works to devalue the money we-everyone else-work for (even after it’s been earned), with my disgust for the lending fiasco that in part landed us in this mess. They are two different and separate problems both contributing to the same financial crisis.

          I am 33 years old, and still waiting to buy my first property. For the last several years, I have been in a financial position to afford a mortgage as high as $1800 per month (a modest, used home in Los Angeles’ suburbs), but I don’t have a down payment so I didn’t buy. I now have enough in my 401K that I can use it as down payment on a home I can afford (first time buyer loan option), but the US Government is propping up home values, and keeping unqualified lenders in homes, and me OUT, even though I can lay out more cash as down payment than their current lender has paid in the 1.5 years he’s “owned” the home. Aside from the blatant robbery of handing our money to some other private company, this is precluding me from being able to get a home at the best price. I’m the next round of home buyers and I’m not getting a chance because of lobbyists and an ignorant and indifferent public who are (by whatever means) already in nice houses, and only thinking about keeping what they “have”.

  • Joe Safdia

    At first, even though the idea of an auto bailout left a bile-like taste in my mouth, I wasn’t expressly against it. Millions of jobs are at stake when it comes to the survival of those 3 companies after all, right? The more I thought about it though, the more I just don’t think that’s true. I don’t think there would be as many job losses as the Democrats, Republicans, and the Big 3 say there will be. Heck, I bet most of those auto workers would even be able to keep their jobs even if the Big 3 did go under.

    Imagine this scenario: The bailout doesn’t pass and the Big 3 begin to lose more and more business. Now these aren’t small car dealerships. They are giant corporations. Do you really think corporations that large are just going to “go under”?

    The demand for automobiles will always be there, and other companies and businessmen will always be there to pick up the Big 3’s market share. Now as the Big 3 continue to decline, yes there will be factory closings and layoffs, I never said that there wouldn’t. But there would also be factories that are sold to smaller car companies, entrepreneurs looking to enter the auto business, and more successful foreign companies like Toyota. The new owners of those factories wouldn’t suddenly lay off all the workers (otherwise, why buy the factory in the first place). And the demand for cars from companies such as Toyota is huge (go look outside and see how many cars on the street are foreign made), so we know that these companies will be manufacturing cars specifically to sell here in the USA. And I’m sure it costs less for Toyota to manufacture the cars in America than to manufacture them in Japan and pay the cost of distribution to ship them to America. Just because the company is foreign doesn’t mean the jobs will be held by foreigners; as you can see it would actually be profitable for companies like Toyota and Honda to keep these jobs in American hands. In other words (to summarize my rambling), foreign companies like Toyota will surely buy out most of those auto plants and keep those workers working. So will investors, businessmen, and smaller car companies.

    Not only that, but as I said, Americans will still want cars to buy no matter what happens to the Big 3. If the Big 3 goes under, other companies will be competing for those customers. Toyota will want to make a better automobile so that that group of longtime Ford customers over there will start buying Toyotas instead of BMW’s. The higher demand on these companies will lead to the necessity for higher production, which will mean that these companies will have to HIRE MORE WORKERS (maybe the ones that get laid off by the Big 3, who knows). In other words, not only will they be competing for the Big 3’s former customers, they will be competing for the Big 3’s former employees.

    And plus, these corporations are so huge that the “going under” process would probably take years. When a small dealership goes under, you drive by the place one day to see the owner putting up an “Out of Business” sign on the gate. Do we really see the CEO of GM putting up an Out of Business sign on the front door to GM’s corporate headquarters–with a single tear in his eye the whole time–before slumping into his private jet and flying home? No, though that is some funny imagery. But the Big 3 has so many assets, I imagine, that they’d be able to just keep alive long enough so that they’d still be barely alive when the economy is at at upswing again. And just when people will be looking to buy a brand new gas-guzzling Ford SUV too.

    Sure, a bailout will probably protect those jobs too–until the Big 3 comes back in 2015 with their hands out for another emergency bailout.

    So that’s what I think when I hear people say “Well, I don’t like bailouts, but we have to do something to protect those millions of jobs”. But then again, I don’t know too much about economics, so I really don’t know.

  • Mr. Pickles

    As I sit here I can’t help but wonder why Ron Paul isn’t taken more seriously. These bailouts represent everything that I don’t believe America stands for and it’s killing me that more people don’t recognize this with the same clarity as Dr. Paul. The soul of the American spirit – pulling up your bootstraps and controlling your own destiny – is certainly under assault.

    My hope is that he and those who believe in him never give up the fight because his is the only voice I feel I can place my faith to defend America for what I believe it once was and shall be again.

  • David Fernandez

    I make this argument to Henry Paulsen and Ben Bernanky, if your so smart when it comes to managing our economy, why then did this crisis happen on your watch? The American people have absolutly no reason to trust the “expertise” of these people and the truth is they couldn’t fix it even if they wanted to. So lets do like Ron Paul says and let the free market pick out the winners and losers because obviously, these high and mighty elitists are anything but qualified for their jobs.

  • @ Aaron K. Davis Nov 24th, 2008 at 7:09 pm

    “At what point do American Citizens put their foot down (hard) and say ENOUGH!!! ”

    I don’t think we know the way anymore… we’re all angry but where do we turn? Our corrupt politicians? Our ignorant, though patriotic, military? Police?

    The People? The majority of which suffer from cognitive dissonance?

    • Aaron K Davis

      Dear Lost American, I know exactly how you feel. Nobody in Washington wants to hear us complain about how they continue to legislate against the Constitution, so what do you do? Check this out… I heard about this through a Libertarian meetup.com group I subscribe to in Ventura CA.


      Don’t be deceived by the word “revolution”. We’re not taking guns to the White House or anything crazy like that (although even typing those words on a blog will probably put me on some watch list somewhere). This is about a Continental Congress. The kind of painstaking, critical review of the Gov’t by it’s citizens, and a formal declaration that we want these Constitutional infringements addressed, and fixed immediately. It’s a line in the sand basically, saying Americans are over here, and you, the Government aren’t playing by the best set of rules God (however you think of Him) could give us.


  • Moe Ram

    Dear Mr. Paul,

    I do not know why you did not run for President on the Libertarian Ticket. You would have shown the country that right now you are pulling at least 5% support and shown the republicans how wayward they have gone. We need you as President.


    • Because he’s a Republican, in the most traditional sense.

      Him running for president as a republican is what catalyzed his popularity.

      After he began running as a republican he was under contract in several states. If he had switched he would have been bumped off the ticket in those states anyway.

  • bmeister

    See: Clearing Up This Mess by George Monbiot

  • Brian from Alaska

    I cannot remember who said this but it is a quote. “A government who robs from Peter to pay Paul, can always count on the support of Paul.”

  • Bill White

    Hi Ron,
    As always, well put common sense. What pains me more than anything about this bailout business is the double dipping that no one seems to mention going on with the banks. Last year Washington Mutual allowed a man 1300 miles from my home to drain my bank account with improper ID and then called me a liar in writing when I tried to get the money back after having reported it less than 15 minutes after it happened, contacting the police in CA and putting an alert on all 3 credit bureaus. Because they wound up holding all of my cash for almost a month, I missed payments to my credit cards and my rates quadrupled. Paying outrageous interest, over the limit fees when I couldn’t keep up and everything else they pulled caused my credit rating to plummet from 760 down to 520. This cost me thousands in pure profits to the same banks that are now getting even more money through the bailouts. I know I’m not alone in experiencing these sorts of things. I find it not only unethical and ludicrous but down right insulting that politicians reward this corrupt and irresponsible behaviour with our money.

    In truth, I’ve seen so much outright fraud and abuse in business of late that I hate to do business at all, and all the while it seems these companies get a pass from Uncle Sam.

  • Laurie Murray

    The Bumper sticker education is a great idea. All your comments are a great help to me. Is it ok to reprint any of your comments or Dr. Paul’s speeches in our local newspapers? I live near Ithaca NY where many people are liberal Democrats or ostrich-like Republicans. So many people have not heard the things we discuss so openly on this website. Many have not discovered the truths that Ron Paul is teaching us. Please advise me on how I can get the word out…because if we don’t work hard right now, we’ll not have educated enough people in time to have a successful revolution in 2012. Please tell me how the rest of you are sharing the Campaign for Liberty/Ron Paul message with the masses….one on one is good, but not enough to effect change. I value your ideas. Anyone still holding local Ron Paul focus groups even after the farce of a two-party election?

  • Nancy Cieslinski

    I am amused by the concern for the potentially unemployed auto workers. During the Depression, the unemployed were put to work, improving the infrastructure. I would appreciate my tax dollars being used to the benefit of myself and other hard-working Americans. Since many have made no effort to educate themselves into a better position, they deserve failure. WHY SHOULD WE SUFFER FOR THE MISTAKES OF THE LAZY AND THE STUPID?

    I understand living within my means. When I bought a home, 3-years ago, I was offered many loans that would have allowed me to buy a home beyond my means. What did I do? I bought a home with a fixed-rate 30-year mortgage, that I could AFFORD. In spite of my best efforts, I got behind in my payments and was nearly in foreclosure. Solution? I got another job and worked overtime until I had paid myself out of trouble. Why can’t all those who thought they could get something for almost nothing, do the same? WHAT HAPPENED TO PERSONAL RESPONSIBILITY AND INTEGRITY? Currently the only debt I have is my mortgage; no car payments, no credit cards, no other debt.

    WHERE WERE ALL OF YOU DURING THE LAST ELECTION? Not one incumbent, nor did Mr Obama, got my vote. I am not young (>50), and I can see the simple truth of the situation. I support Dr. Paul. I wonder what happened to brilliant and inspired LEADERS, like Dr Paul and those who drafted the Constitution. How did political SERVICE become a career? Why is this a 2-party country? Why not 3-, or 4- or more political parties.

    The next election should go to the young. You need to start talking about politics, in addition to relationships and sex! I am tired of being lead to the slaughter! My age-mates, who give lip-service to being the generation that would never get old, have fallen in line behind their parents and are now assisting in mine and your financial DEATH.

    • TC

      I take umbrage with calling the American autoworker, or for that matter, any American worker “lazy and stupid”. The workers did not create this mess; the so-called “educated” executives did. It was the corporate heads that ran these companies into the ground. To suggest that all Americans bought mortgages too big is ridiculous. Many of these workers are losing their homes because they’re losing their jobs, not because their mortgages were too big. Haven’t you watched over the last 8 years or so while companies ship the jobs overseas? If this Revolution is to get off the ground, belittling and bashing fellow Americans is not the way to go about it. When you don’t have a job, living within your means is a difficult thing to do. (Stuff costs $$). How the He** do you know these people aren’t trying to improve their situation? The high-tech jobs and skilled, educated jobs are leaving US shores also, Ms. Cieslinski. Are you going to blame the unemployed-but-educated Americans as well? If you think they ask too much in wages, are you going to lower the prices of housing, utilities, groceries to match the downward wage adjustments? I like to hear your plan. Furthermore, most low-wage jobs don’t pay health insurance so even if someone works 2 jobs as you cockadoodle and cluck about doing, one catastrophic illness can render them unemployed and uninsured. Also, whatever lower-wage jobs are available are being given to foreign-born types and causing the job situation to be even more dire. Since you’re undoubtedly the type who doesn’t believe that employers should be saddled with providing health care, and that workers should simply be glad to have any job, that pretty much sticks the taxpayer, doesn’t it? Unless you have an answer on bringing down health care costs as well. Can you pay health care out of your pocket on just your wages alone? Can anyone here on this board do that? If not, is that the same boat we all should be in? Your sanctimony is abundant, but your insights are abysmal.

      • dtknapp

        Another comment taken as Black and White, I guess the best way to respond to your reply on Nacy’s post would be nothing at all, as everyone else chose but I…If your boss tells you your company’s in trouble and the news is focusing all of it’s time on your industry collapsing do you sit around and wait??? Think harder before you spout off. This is our problem as americans, generations of apathy and throw in some creative education, have brainwashed people into thinking we are owe’d something..were not, work for what you have and be thankful your not planting coffee seeds for $2 a day.

  • Grant

    I just have one question, Dr. Paul how do you continue to move forward without literally losing your mind? Everyday for 20 years you have sent the same truthful, unwavering message to anyone in politics and the media, that would listen. They laughed at you, said you didn’t know what you where talking about, put you in a box of just some crazy old relic who’s beliefs are out dated and unconventional. But still you press on just like your message, true and unwavering till the very end. It is in this main thing that I see what a true leader is. Your steadfast nature to continue on and keep fighting is testiment to that. I would be proud to call you President Paul.

    • Jane

      Beautifully said!

    • Will

      You have to admit, Dr. Paul has bigger balls then all 4 armed forces combined. At the very least he has done in his legacy for us is to give an alternate way of thinking.

      It really sucks that socialized ideals and satisfying the status-quo has gotten in the way of letting Ron Paul’s word of truth get out. Ron Paul has a huge voice, but without amplification of the media, he has become muted. I think he will agree that it will take all of us: those who want something different, something that is right to get his message out. Until then the media will listen and start giving him more attention then FOX and ClintonNewsNetwork have.

    • Agreed. It made me so mad how the “conservatives” treated Dr. Paul at the 2008 presidential debates and just in general. They mocked him, rolled their eyes at him…and here we are going broke after BOTH Ross Perot and Ron Paul warned us. Most everything Ron Paul has predicted has now come true and still he is trashed as being “kooky”, “nuts”, etc. Well how do you like him now, jerks? Yet, Obama can get elected using vague buzz words like “change” and “hope”. Well I hope those buzz words can put a roof over one’s head or food in one’s belly.

  • rufus

    Dear people: Keep in mind that almost half our voters pay no taxes at all. With that kind of representation with no taxation, it is no wonder our elected leaders have a hand-out mentality. If Ron Paul can lead a revolution today I am ready as of yesterday. Reforming our tax code so everyone has “skin in the game” is a critical element.

  • Gary J. Mallast

    Dr. Paulson and Dr. Bernanke have spun completely off into la la land. They don’t seem to have a clue as to the difference between real capital from real savings and just issuing funny money. President Bush, and Drs. Bernanke and Paulson appear to be true disciples of 19th century socialist and monetary crank Pierre Joseph Proudhon.

    By the way, I have been looking for a job here in Jennifer Granholm’s* “Peepuls Reepublik of Misheegun” for 5 1/2 years and am desperately broke. Please, if anyone knows of anything let me know. I have degrees in Journalism (M.A), History (B.A.),Automotive Technology (Assoc.), and Broadcast with Video Concentration (Diploma). I have ASE and Michigan Master Auto and HT mechanic certification. I have roughly 17 years automotive technical writing experience–seven on military projects. I am a published author. Please congtact me at [email protected]. Thank you.

    In case you didn’t know our governor is famous for raising buiness taxes 100-700% in a state losing 10,000 to 20,000 jobs a month. And, locking up the state legislature in the capitol until she got the vote she wanted. And, creating a financial Reichstag Fire to keep the legislature from reducing spending. So naturally Pres. Elect Obama called her in for economic consultations.