Bailouts in Many Languages

10/06/2008 12:01 am EST

Focus: GLOBAL

Samuel Hopkins

Editor, Energy and Capital, Green Chip Stocks, and Wealth Daily

Sam Hopkins, editor of Wealth Daily, says the US bank bailout may be contagious.

US Treasury Secretary Hank Paulson is extending his powerful hand to international banks, [which will be included in the $700-billion rescue plan]. “If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution,” he recently said on news magazine “This Week.”

I would normally take Paulson’s shift as bullish news for international banks, because extension of American help could restore liquidity in places like Latin America, Eastern Europe, and developing Asia. But the sad fact is, is that the bad debt hasn’t settled, and the assets the Treasury is supposed to be buying still don’t have a set price.

Japan’s vice finance minister voiced restraint, saying, “At the moment, I don’t think Japan needs to launch a program similar to that of the United States.” That’s the standard across the G7 group of leading industrialized nations, even though their central banks pooled $180 billion with the Fed. On an individual level, our peers are more hesitant to crank up the money machines.

In our land of the failed and home of the bailed, incompetence now rules. But you can bet what money you have left that if the executives of the financial giants being yanked out of trouble by the US government had been in China, there’d be no “golden parachutes.”

Last year, China’s bribery and bogus pharmaceuticals scandal resulted in the execution of food and drug safety regulator Zheng Xiaoyu. Now the man responsible for oversight in the melamine-milk scare must surely be fearful of what’s in store.

Who’s to say what proper punishment should be for guys like former Fannie Mae CEO Daniel Mudd and Freddie Mac head Richard Syron? They were a hair’s breadth away from getting a total of $24 million in severance pay—despite having let their companies, and this country, veer into a disaster.

When the government takes such sweeping control of free-flowing systems, you have a right to get a little spooked even if they tell you it’s for your own good. Actually, you should be even more scared when they say that! You won’t find a politician, businessman, or convenience store worker who can really tell you where we’ll be next week. What you can do, though, is keep a close eye on your investments and minimize risk in your own accounts.

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