Clark Howard's Tips

March 25, 2008

We have had money stolen from us by our elected officials in Washington, D.C. This is not a normal rip-off alert, but rather something Clark is outraged over.

Last week, he told you that the Federal Reserve felt sorry for Bear Stearns -- a company where the average employee earns just under $300K annually -- and orchestrated a taxpayer-funded buyout of the company. Bear Stearns doesn't deal directly with the public, nor do they qualify for FDIC insurance. But they are influential in Washington. That's why Treasury Secretary Paulson took $30 billion of our dollars and engineered the JP Morgan takeover. We taxpayers took on the risk, but JP Morgan got the benefit.

The consequences of this kind of thinking are ugly. Under the guise of moral equivalency, Sen. Clinton has issued a proposal for a $30 billion bailout of those who can't pay their mortgages. What she's arguing is that if we save the bigwig capitalists, we have to save the commoners too. In order to do so, we'd have to borrow from the American people yet again by taking money they don't have. Right now we're already on the hook for $1 trillion. We're getting ripped left and right. Is there anyone who really represents our interests?

Paulson had the arrogance to say the Bear Stearns debacle was not a bailout because it was sold at $2 a share (since revised to $10 a share). Clark is appalled that in a free market economy we're getting decisions handed to us based on who has the power and influence. Politicians are lying with straight faces saying that none of this is a taxpayer-funded bailout. On both sides of the aisle, they're burying their heads in the sand, or saying the move makes sense under the "Too Big To Fail" theory. But Clark thinks if Bear Stearns made bad bets with borrowed money they should end up with nothing.

It's not impossible that Sen. Clinton's proposal will gain some real traction in an election year. But consider this: Most Americans pay their mortgages. Why should we be taxed to help out somebody who's not paying theirs? In rare situations, some retirees have had houses stolen from them by con artist mortgage brokers. Clark can see the value in a bailout for that small segment of the population. But somebody who bought with no money down and isn't paying? Clark can't see that. But what can you expect will happen after we bailout people making $300K/year?

Consumer advice courtesy of