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'Bailout Nation': Barry Ritholtz Takes on Citigroup, Chrysler and Other Companies
How long does it take to explain how the U.S. government has ended up spending billions of dollars in taxpayer funds to bail out some of the country's largest, most well-known corporations?
If you check with bailout critic and Fusion IQ chief executive Barry Ritholtz, the answer is about 300 pages. "Bailout Nation, Ritholtz's new book, "points fingers and lays the blame at a number of places," the author told ABCNews.com.
"Now that the worst of the crisis is over, we need to start thinking about how this happened and how we can prevent it from happening again in the future," Ritholtz said. "It's important not only that we avoid repeating the mistake but we figure out the causes of this and then start setting about repairing the damage that was done."
Below are some of the highlights of the analysis in Ritholtz's book, courtesy of the book's publisher, Wiley. For an excerpt from the book's introduction, see the third page.
From 'Bailout Nation'
1. This was not a "perfect storm" -- unforeseeable random events that just happened. In reality, it was a series of conscious decisions made by investment banks, commercial banks, government officials, regulators and central bankers that were simply awful.
2. The bailout has cost more so far than the Marshall Plan, the Louisiana Purchase, the race to the Moon, the S&L crisis, the Korean War, The New Deal, the Gulf War II/Invasion of Iraq, Vietnam War, NASA and War World II COMBINED. (Oh, and that includes adjusting the other expenses for inflation).
3. The CEOs of the biggest 15 investment banks, mortgage firms and commercial banks "retired" from the firms they helped to ruin, and took home more than $1.5 billion in compensation.
4. Warren Buffet offered Lehman Brothers a multi-billion dollar investment that would have saved the firm. Dick Fuld, Lehman's CEO, turned him down, so he invested it in Goldman Sachs instead.
5. No, contrary to popular rumor, AIG was not brought down by the collapse of Lehman Brothers. In fact, AIG's exposure to LEH was balanced. Instead, they were like two swimmers caught in the same riptide. And the same forces that led to Lehman's demise also killed AIG: too much leverage, too much sub-prime mortgage exposure, too little risk management.
Highlights From 'Bailout Nation' (cont.)
6. When the United States bailed out Chrysler in 1980, the UAW had 1.5 million members and the Big 3 had a 75 percent U.S. market share. Since that "successful" bailout, the UAW is down to 400,000 members and falling; the Big Three fell below a 50 percent U.S. market share for the first time in May 2008.
7. Nearly every bailout had followed the same script: similar timeliness, official statements, stock action, politics and, ultimately, taxpayer money.
8. Much of the damage to these companies was self-inflicted: the excess leverage, mortgage exposure, deregulation and lowering of credit standards took place at the behest of these firms. They were not killed by others, they committed suicide.
9. The S&L crisis wasn't a bailout; it was a payout on a federally funded deposit insurance program.
10. The total cost of the bailouts so far, including loans, guarantees, assumption of risk and outright gifts, exceeds $14 trillion.
11. The Troubled Assets Relief Program was an elaborate ruse designed to hide the fact that Citigroup was insolvent.
