An Even Bigger Bailout Needed: How Much Is It Going To Take To Plug The Hole?

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The bailout plan is not working. This morning’s New York Times has reported that the U.S. government is facing mounting pressure to add to the bailout kitty.

  • AIG, the nations’ biggest insurance group is now negotiating for more money following the $150 billion it has already received. It suffered a $60 billion loss in the 4th quarter of last year, the biggest in corporate history.
  • Citibank is negotiating an injection of funds (over and above the $45 billion it has already received) that is likely to raise the U.S. government’s stake to about 40%.
  • General Motors and Chrysler, two of Detroit’s biggest automakers, are seeking $22 billion on top of the $17 billion already granted to them. Steven Rattner, co-founder of a private equity firm, the Quadrangle Group, has been appointed an adviser to the Treasury on the auto industry.

Yet, according to Reuters, most Americans approve of President Obama’s economic plans.

How much is going to take to rescue these floundering companies? And what impact will this have on smaller companies that do not even make to the press?  Or all of the so-called green jobs that America has been awaiting? Or the the rising expenditure needed for health care?

Although bank nationalization is apparently the U.S. government’s least desired option, it might not have another choice. As the administration takes bigger stakes in banks and car companies, the value held by existing shareholders is being diluted, which could make it even harder to attract private money in the future.

What is the way out? Should the government continue to plug the hole?  Or it time to seriously think about letting them fail?

Image credit: Reuters

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