Giving money to children

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Giving money to children  

We recently saw an episode of Two and a Half Men in which Jake acquired some money which he promptly wasted, a scenario that should come as no surprise to anyone with young children. This was funny on TV, but was less amusing with the 2008 bailout of financial institutions.

While some assumed that the bailout would increase liquidity, others assumed that the money would go directly to senior managers, since it was being given largely to bad managers whose companies were in trouble because of greed, fraud, and incompetence. And, in fact, we are given to understand that the bailout money given to one investment bank went to bonuses. In another bank, $50 million was budgeted for renovation of the already luxurious executive floor. One insurance company budgeted $500,000 for the redecoration of the interior of their corporate jet, a redecoration that required a reduction in fuel capacity because of the increased weight. One bank used the money to buy a bank in China.

At least two banks told the government that they did not need or want bailout money. They were told that if they did not take it, there would be unpleasant consequences in future dealings with the government.

It is clear that we suffered a lack of liquidity that had to be dealt with promptly. But how immediate is promptly? We once asked our instrument simulator flight instructor – a man with an extraordinary 3 years of flight time (that is over 30,000 hours in the air!), who had flown Pan Am Clippers, who had forgotten more about flying than we would ever know – what was the first thing he did in case of an emergency. He said, “First, I wind my watch…” We suspect that the economy would not have suffered if congress had taken a few days to put on at least minimal constraints, such as prohibiting the companies from using the money for fruitless purposes that many feel should be criminalized.

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