Bailout Bonds for Ordinary Americans?

Just in case you were feeling a little left out of all the bailout funds going around, not to worry. Our government has not forgotten about ordinary Americans.

The Obama administration has actually been working overtime to come up with ways for you and I to show our patriotic support for our economy and our government’s bailouts, of what is looking to be just about every industry in the US, by investing our last dollars along with our tax dollars in the people and institutions that brought us this mess.

According to The New York Times (registration required) the U.S. May Enlist Small Investors in Bank Bailout. Strange, I thought we had already invested trillions of our tax dollars. But, I guess they need more.

As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.

The idea is that these investments, akin to mutual funds that buy stocks and bonds, would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. But there is another, deeply political motivation as well: to quiet accusations that all of these giant bailouts will benefit only Wall Street plutocrats.

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The funds, the thinking goes, would buy troubled mortgage securities from banks, enabling the lenders to make the loans that are needed to rekindle the economy. Many of the loans that back these securities were made during the subprime era. If all goes well, the funds will eventually sell the investments at a profit.

Yes, you will have the opportunity to share in the profits. Above our taxpayer invested profits, right? Of course that’s only if there actually are profits.

“This is an opportunity to forge an alliance between Main Street, Wall Street and K Street,” said Steven A. Baffico, an executive at BlackRock, referring to the Washington address of many lobbying firms. BlackRock, a giant money management firm, is playing a central role in the government’s efforts and is considering creating a bailout fund. “It’s giving the guy on Main Street an equal seat at the table next to the big guys,” he said.

So, we’ll get to sit at the table next to the big guys. But wasn’t that the illusion that lost us our 401k’s? Oh, well…

… If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses.

Nonetheless, the administration and executives in the financial industry are pushing to establish the investment funds, in part to counter swelling hostility against the financial industry.

For the investment managers, the benefits are potentially large. These big firms can charge healthy fees to investors for taking part. They will also have the marketing prestige of being the firms the government turns to at a time of crisis to help sort out the country’s financial mess.

So, okay. We buy bonds/funds. The government gets more money to play with. The Investment firms get money (fees) for helping the government get more money from ordinary Americans. And the financial industry (and others) gets more money to lose – along with a patriotic PR makeover to boot.

Yes. I can see, it really is a win-win-win.

And what was it again that we ordinary citizens get? Oh, yeah, that’s right, an opportunity to play and win with the big guys. Or lose again. Hmmm…

It’s just a thought, but personally, I’m thinking they should probably not call them “Bailout Bonds”. It could easily be confused with Bail Bonds. And that might lead people to associate them with someone actually going to jail for committing a crime.

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