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Auto bailout price tag rises to $25 billion. How high will it go?

Washington Post -- During the depths of the financial crisis, the U.S. government spent some $85 billion to rescue Chrysler, GM, and a few of their suppliers, in order to prevent the two large automakers from imploding. According to the latest U.S. Treasury report, taxpayers will now lose $25.1 billion on those auto bailouts. That’s $3.3 billion more than previously estimated. And it’s not even the final price. So how costly could the bailout get, anyway?

A lot depends on whether GM can alleviate its current woes, especially in Europe. And a lot depends on when, exactly, the U.S. government decides to sell all the shares of GM that it currently holds. Analysts say that the final cost of the auto bailout could actually turn out to be much lower than $25 billion. But, of course, there’s a risk it could end up


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Submitted Aug 16, 2012 By: skb69sa
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Author Topic: Auto bailout price tag rises to $25 billion. How high will it go? Back to Topics
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Martinman
Champion Author Mississippi

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Message Posted: Aug 19, 2012 10:25:34 AM

Really?

The Joy Of Credit Default Swaps: Why GM's Bondholders Are Praying For Bankruptcy

Use of credit default swaps by Wall Street and the large Corporate banks as was attempted here, amounts to little more than legalized corporate theft. It allows the largest institutions to literally steal all the cash value from the unsecured creditors. That was *never* the intent of the bankruptcy laws, to provide secured debt-holders an avenue to strip a company of its value.

Even the Wall Street Journal thought it was important enough to highlight:

Wall Street Bets on Debt That Doesn't Exist

And there are many more such articles, all well before the bankruptcy-light that was designed to prevent this.

Use of the UAW was never more than a partisan scapegoat to hide what was going on, and ultimately to completely push the costs of Chyrsler and General Motor bankruptcies onto the taxpayers. All while Wall Street and the large institutional Banks walked away with ALL the companies' assets.

Its the exact same thing they did to the housing market.

And its why the country is in the shape, it is now...

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polarbear2
Champion Author Maine

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Message Posted: Aug 19, 2012 7:01:39 AM

Thanks for the views from Mars.
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Martinman
Champion Author Mississippi

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Message Posted: Aug 18, 2012 10:12:42 AM

That's real intelligent.

Allow the biggest market investors (big banks and Wall Street) to buy bonds. Allow them to hedge those same bonds with credit default swaps. And when it becomes more profittable for those underlying assets to fail than survive, force the company into bankruptcy - solely for the profit.

My, what an excellent what to steal the company value from the common shareholders, the creditors, and small bond holders that don't have the pockets to buy credit default swaps.

-----

Hey, you know what. I bet we could do the same thing with mortgages, if we could find a way to bundle them into securties large enough to have credit default swaps written against them...

Now, we just have to figure out how to get a large number of mortgages to fail, once we've bundled them and got the defaults written...

They destroyed the mortgage market sector of the U.S. economy, they dstroyed the credit markets, and they almost destroyed the auto manufacturing market. But Wall Street, the big banks, and AIG sure did get themselves bailed-out first!

Didn't they!

And who do you think would have footed the bill for pensions and healthcare, if either were forced into full-fledged bankruptcy?

(HINT: Google MediCare and the Pension Benefit Guaranty Corporation)

[Edited by: Martinman at 8/18/2012 11:19:03 AM EST]
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polarbear2
Champion Author Maine

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Message Posted: Aug 18, 2012 7:13:26 AM

In a bankruptcy does the union get to the head of the line?
No it doesn't
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Martinman
Champion Author Mississippi

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Message Posted: Aug 17, 2012 1:29:51 PM

Again, explain to me how the bondholders got screwed. It was the bondholders intent all along to try to force bankruptcy, not becasue of some beholden belief in the bankruptcy law, but that they would actually PROFIT as a result of failures by Chrysler or General Motors.


The Joy Of Credit Default Swaps: Why GM's Bondholders Are Praying For Bankruptcy


The one that got 'screwed' are the small bondholders, who got 'screwed' by the large institutional bondholders that also held Credit Default Swaps for GM's preferred debt.
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Martinman
Champion Author Mississippi

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Message Posted: Aug 17, 2012 1:14:40 PM

He might be a drinking man, but someone else is on drugs...

First, this is nothing more than a paper loss, based upon the current market price for General Motors stock. Until the stock is sold, any profit/loss is nothing more than a value calculation.

The very brief snippet above, clearly slants the article's intent. For example, it later goes on to state:

"Meanwhile, says McAlinden, it’s worth putting the cost of the bailout in context. The $25.1 billion Treasury may lose has to be weighed against the cost of not bailing out GM and Chrysler in the first place. A study in 2010 by the Center for Automotive Research found that the auto rescue likely saved 1.14 million jobs and saved the government $28.6 billion in lost tax revenue. And those estimates, McAlinden said, are likely conservative."

Second, initial estimates were that the Federal government would lose $44 billion on the bailout, which was later reduced to $30 billion in December 2009.

Tell them the truth, but only some of the truth, and nothing but the truth - that paints the picture you're trying to paint.

Ah, the fine art of deception...

Third, a study by the Center for Automotive Research concluded that a failure of any one of the domestic auto manufacturers would have ultimately cost 2.9 million jobs, push unemployment over 14% (technical definition of a Depression), shut-down the entire North American auto manufacturing sector for at least 18 months, and cost federal, state, and local governments more than $400 BILLION in lost tax revenue and higher costs for social programs.

CAR Research Memorandum: The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers
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polarbear2
Champion Author Maine

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Message Posted: Aug 17, 2012 10:53:58 AM

fajeff01 What are you drinking man? Obama is the one responsible for the debacles at Chrysler and GM. The bond holders got screwed and the unions got ownership.
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spiderjay
Champion Author Little Rock

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Message Posted: Aug 16, 2012 7:10:55 PM

wow
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GatorGuy
Champion Author Columbia

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Message Posted: Aug 16, 2012 4:23:13 PM

keep bidding
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bluebird1
Champion Author Toronto

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Message Posted: Aug 16, 2012 2:35:46 PM

When the gov't gets involved you know overspending is more than likely.
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fajeff01
All-Star Author Atlanta

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Message Posted: Aug 16, 2012 2:18:37 PM

It's not Obama's fault the Bush administration and congressional Republicans approved the bailout. Obama - once again - was just left to deal with the mess.

IT IS VERY SAD TO KNOW THAT REPUBLICANS BAIL OUT CORPORATIONS BUT NOT PEOPLE. We're just such Christians in America aren't we?!

You can be sure the bible TEACHES this is NOT want Jesus wanted - "Take from the poor and give to the rich" - RIDICULOUS! Yet, that's STILL what currently campaigning politicians want - "take from the poor and give to the rich."
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357revo
Champion Author Pittsburgh

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Message Posted: Aug 16, 2012 2:08:33 PM

Had GM and Chrysler gone to Chapter 11 bankruptcy, those companies would not have dumped 100% of their work forces onto unemployment. The companies would have been reorganized, gone leaner in operation, and gotten a new lease on life, without saddling the U.S. taxpayers with billions of dollars in debt.

However, after the first infusion of money [under the Bush administration] didn't produce changes in GM's unionized labor force, Obama took it upon himself to dictate the reorganization. He screwed the Preferred Bondholders, who were supposed to be first in line for payment in the event of a reorganization, forcing them to accept 10 cents on the dollar for their investment. Obama then essentially gave more than half of the assets of the company to the unions, so that they could maintain the plush union contracts and benefits, which many would argue put GM in the financial fix that caused the failure.

Obama also forced the closing of a significant portion of dealerships, picking and choosing winners and losers in the process. Some claim that dealerships owned by Democrat contributors were allowed to stay, which Republican-backers lost their businesses.

In the union-dominated reorganization, former DELCO employees were stripped of their health and retirement benefits.

So much for the little guy. Obama made sure his union backers got the lion's share of the company, and screwed everybody else.

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357revo
Champion Author Pittsburgh

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Message Posted: Aug 16, 2012 1:46:09 PM

The first stories about GM repaying their loans ahead of time was a Public Relations fib. In actuality, they used money from a second line of credit, also of taxpayer dollars, to "pay off" the first loan. In essence, NO SIGNIFICANT DEBT was paid off.

Meanwhile, the government is sitting on shares of GM stock, and the value of that varies as the share values change. That's why the loss estimates are changing.

And because GM is pushing losers like the Volt, and because the unions are pretty much running the company, the value of all that government stock is going downhill.

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tes283
All-Star Author Tampa

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Message Posted: Aug 16, 2012 1:27:20 PM

If the US dumps the shares it will effect the Stock Market...so no good answer. It is money spent so...time to take a blood bath.
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dieselfiendSC
Champion Author South Carolina

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Message Posted: Aug 16, 2012 12:51:31 PM

We will never know the truth from this bunch of liars.
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wayne1066
Sophomore Author California

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Message Posted: Aug 16, 2012 12:24:46 PM

Why is this viewed as a short zero sum profit/loss? Consider the long term value of the stock and the dividends a profitable company would pay over decades. Why sell the government stock back? Hold it and earn dividends for decades.
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TustinDad
Champion Author Orange County

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Message Posted: Aug 16, 2012 12:00:21 PM

hatterasjack wrote: "How much would the price tag have been if those companies had gone belly up and put all those workers on the street."

Much, much higher. But that's a question that's not asked around here. You wouldn't be able to blame POTUS for that, would you?
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msgt_usa
Champion Author Virginia

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Message Posted: Aug 16, 2012 11:55:32 AM

suprise...suprise...suprise
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Samo1961
Champion Author Los Angeles

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Message Posted: Aug 16, 2012 11:52:56 AM

Typical!!
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sramroop
Champion Author Birmingham

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Message Posted: Aug 16, 2012 11:48:32 AM

Higher as usual..
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JagXKR
Champion Author British Columbia

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Message Posted: Aug 16, 2012 11:47:57 AM

Could be lower or higher means a lot of speculation until the final share is sold. I still think the bailouts were necessary but more stipulations on how they run their organizations should have been demanded.
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hatterasjack
Champion Author South Carolina

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Message Posted: Aug 16, 2012 11:43:47 AM

How much would the price tag have been if those companies had gone belly up and put all those workers on the street.
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NorthglennBill
Champion Author Denver

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Message Posted: Aug 16, 2012 11:35:55 AM

A drop in the bucket compared to the $billions lost on solar power and trying to compete with the Chinese.
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tomok
Champion Author Portland

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Message Posted: Aug 16, 2012 11:35:35 AM

Giving money to a failed company that still cannot get it 'right.' Squandering taxpayer money and Barry should know better. If this much government money is lost, GM should be Forced to produce a product that will sell and people will gladly buy. Copy what the other successful auto companies are doing, it's that easy.
Whatever the size or shape of the vehicle, Produce and ‘Drive’ vehicles with high MPG, are very safe, reliable, have a ‘reasonable’ cost and a good ‘value’ for the money.
The price of fue
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wang91554
Champion Author San Jose

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Message Posted: Aug 16, 2012 11:33:53 AM

if GM's woes are in Europe, go get a European bailout!
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rhughes1691
Sophomore Author Seattle

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Message Posted: Aug 16, 2012 11:32:19 AM

so how come I don't get a free car. 3.3 billion should see new cars for pretty much eveyone with a driving license.
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rossp
Champion Author San Jose

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Message Posted: Aug 16, 2012 11:31:13 AM

So Obama did the auto industry bailout? Oops, that was Bush II. Looks like the Repidiots are even willing to blame Obama for the Spanish Inquisition as well as the fall of Adam.

I'm not saying Obama is without faults. But TRY to do a better job of fact checking that Fox and Friends or Faux "News."

[Edited by: rossp at 8/16/2012 12:33:30 PM EST]
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Chitowner
Champion Author Omaha

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Message Posted: Aug 16, 2012 11:30:36 AM

cut the pensions and move on
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waterwerks
Veteran Author New Mexico

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Message Posted: Aug 16, 2012 11:29:32 AM

Ahh...Government Motors...they will just keep selling cars and making subprime auto loans to folks that should be driving a Kia and not a Cadillac!

[Edited by: waterwerks at 8/16/2012 12:30:04 PM EST]
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svspyda
Champion Author San Jose

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Message Posted: Aug 16, 2012 11:25:48 AM

ok
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NanookAK
Champion Author Anchorage

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Message Posted: Aug 16, 2012 11:24:31 AM

Considering the lies that Obama tells and his habit of giving away our money to companies that ultimately go bankrupt, there will be no limit until November.
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kuma2000
Champion Author Honolulu

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Message Posted: Aug 16, 2012 11:24:18 AM

and at whose cost?
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leemun
Champion Author Utah

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Message Posted: Aug 16, 2012 11:23:40 AM

Postponing the inevitable at huge costs to the taxpayer. We should have had Bain on the job to either turn it around or close it down.
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mickealo
Champion Author Spokane

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Message Posted: Aug 16, 2012 11:21:55 AM

don't understand these bail out in the first place if I had a busness and was about to go under and I asked uncle sam for help it would never happen so why is it that the big geys get help that ends up costing me more in taxes that can cause my busness to fail because of over taxation sounds like a two edged knife in the backs of small busness
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IMLURCH
Champion Author Minnesota

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Message Posted: Aug 16, 2012 11:21:17 AM

With the governments track record on bailouts it will go higher.
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rbrowdersr
Champion Author Detroit

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Message Posted: Aug 16, 2012 11:20:00 AM

Election year rhetoric.
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LuckyD43
Champion Author Long Island

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Message Posted: Aug 16, 2012 11:18:48 AM

Although it may not have been a popular decision, consider how many jobs, homes and lives the bailout saved. You just can't put a pricetag on something like that.
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skybiker
Champion Author South Carolina

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Message Posted: Aug 16, 2012 11:18:46 AM

GM is headed for bankruptcy again.....
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Boinkit
Champion Author Twin Cities

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Message Posted: Aug 16, 2012 11:17:40 AM

@phinsup67

Well as a "former" Saturn employee, who lost my job, my house and family, I guess you're right.

"there is no price to be put on that".

Thanks Mr. Obama. Fooled me once with your "hope and change". Won't fool me this time.
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KarateDude
Champion Author Cincinnati

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Message Posted: Aug 16, 2012 11:16:38 AM

What is the ROI ???
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feldagast
All-Star Author Toledo

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Message Posted: Aug 16, 2012 11:15:32 AM

BOHICA
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ciimike
Champion Author Nevada

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Message Posted: Aug 16, 2012 11:15:28 AM

Definitely not one of the US's best bail-outs.
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gasman50
Champion Author Portland

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Message Posted: Aug 16, 2012 11:14:52 AM

Time will tell.........
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19sheldon43
Champion Author Los Angeles

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Message Posted: Aug 16, 2012 11:13:40 AM

Funny I personally don't feel any poorer for it. I still get the same amount on my SS check and I don't pay any more in taxes. So I gess my
question is would I get more money if we did't lose this $25.1 billion?
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phinsup67
Champion Author North Carolina

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Message Posted: Aug 16, 2012 11:12:11 AM

I've always heard you have to spend money to make money. If we saved jobs, families, homes and dignity of thousands there is no price to be put on that.
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cheap59
Champion Author Michigan

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Message Posted: Aug 16, 2012 11:12:09 AM

Old post!
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MightyDude
Champion Author Minnesota

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Message Posted: Aug 16, 2012 11:11:54 AM

not in agreement but was probably the lessor of the evils
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DblChek
Champion Author San Antonio

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Message Posted: Aug 16, 2012 11:10:36 AM

Don't know much about it. I sold my car to pay employment taxes.
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uptherefiners
Champion Author Chicago

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Message Posted: Aug 16, 2012 11:07:29 AM

wrong crapulent, bailout began in January 2009
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hper
Sophomore Author Detroit

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Message Posted: Aug 16, 2012 11:06:12 AM

My simple way of looking at it is...as long as the wasted money flows from one person/business to another, it is not a total loss. It does keep the economy moving. I know..not a good answer but...
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