I'm sure everyone feels warm and fuzzy that the banks - the ones who caused the present crisis by creating dubious and opaque "derivatives", "asset-backed debt obligations", sub-prime mortgages, "credit default swaps" et al - will feel warm and fuzzy that they are the first to recover from the crisis that's wiping out jobs, and personal disposable incomes.
It does show, however, that when the government puts its mind to it, in this case by buying up $125 billion worth of bank held mortgages to inject liquidity into the system, it actually has an impact on that sector. It does raise questions, the first being why are we rewarding the sector responsible for the crisis? But more importantly, why is the government pumping money into a sector that will not directly stimulate job creation or retooling the economy?
The banks sat on the newfound liquidity and only now are increasing loan activity, but had the government invested that money directly in infrastructure it would have created, perhaps, 1,375,000 jobs, since it's reckoned that every $1 billion invested in infrastructure creates about 11,000 jobs. Instead, we're getting a commitment to $12 billion over two years - if municipalities, many of which are totally strapped - meet any federal investment. In other words of total money invested in the economy, if we include the entire $30 billion "stimulus package" from the January budget, 19% went to what I will call direct investment (infrastructure, tax breaks to individuals, housing, etc), the remaining 81% went to the banks. This doesn't include the $10.5 billion bailout to GM and Chrysler, which will go towards paying off old debts, rather than new production capacity. I will only note that Time Magazine listed it as one of the "worst business deals of 2008":
"The Canadian rescue package works out to more than $340,420 for every employee at Chrysler Canada, which has 9,400 hourly and salaried workers on payroll. That's 15% more than the $295,000 per employee that Washington is shelling out to save about 40,000 Chrysler jobs in the U.S. "This money will never be paid back to the Canadian government," says Toronto auto analyst Dennis DesRosiers, with DesRosiers Automotive Consultants. 'The deal has been spun in a positive way, but if taxpayers understood what's really going on, they would revolt.'"
But back to banks and the rest of us. The money that has gone to restore the banks' profitability comes from government coffers. Those coffers are filled via tax revenue. The government receives 46.6% of its revenue from personal income tax, while only 16.8% comes from corporate income tax. Another 12.3% comes from GST (which business don't pay) and 6.8% comes from EI premiums.
In other words the government gets 66% of its revenues straight out of our pockets. Yet the money it has shelled out has been directed by priority in almost exactly the opposite proportions. The Tory government "recession strategy" has been nothing more than another transfer from our pocketbook to the pocketbooks of corporations and the wealthy.