Sandy Weill Says You're Going To Make Money On Bailout

“I think the taxpayer’s going to make money on this, but most importantly, it frees up the banking system,” fomer Citigroup empire buildiner Sanford Weill said in an interview with that morning show your grandparents watch.

He went on to say it was all but guaranteed because of interest rate arbitrage.

Weill said the U.S. government borrows money at the rate of 1 per cent to 2 per cent, and gets a minimum 5 per cent rate of return.

“So the taxpayers should be making an interest profit right from the very beginning, and I think they’ll be paid back all their money,” he said.

Of course this is entirely nonsense. When the government raises taxes, we don’t say that the taxpayers have more money. So why would an increase in government revenues from its investments in financial firms be treated as a taxpayer profit? You aren’t going to get a dime’s worth of dividend payments from the investments being made with your income and the credit of your children. You probably won’t get a taxcut either. Instead, additional revenue will be spent by the government.

This is another reason why there’s so much distrust of this bailout plan in the public: it’s built on stupid, obvious lies. We suspect that the public would be a lot happier with the plan if it was explained to them honestly. But that seems to be the one risk the bankers and bureaucrats behind this bailout aren’t willing to take.

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