My last post expressed surprise that McD’s was involved in the massive Fed emergency program. But then, I got to thinking, if one of the purposes of the bailout had been to save jobs, then McD’s should be right up there with the rest of them, right? After all, McD’s employs lots of entry level staff positions, contributing significantly to aggregate demand. So I wondered further, why don’t we try to evaluate the effectiveness of the Fed bailouts in terms of saving jobs? What if we were to use a new metric, something like the Bailout dollar amount to number of staff jobs saved, or more simply, a Bailout to Staff multiple. To be short, let’s simply call it the “BS factor”. Here then is a table, evaluating the Fed emergency loans in terms of its BS factor among a sampling of recipients (click for full view):
From the list, it is evident that McD’s actually registers the lowest multiple on our newly-minted “BS factor” scale. The highest BS factor belongs, far and away, to Bear, followed distantly by a close tie between Merrill and Morgan.
Citi and BofA register much lower BS factors because of their higher staffing numbers (Taking into consideration, of course, that much of this staffing number is actually outside the U.S. putting them outside the Fed’s purview. But then, every nation that hosts a Citi or a BofA branch likely has sizeable dollar holdings. While the dollar is the US currency, if the Fed debases, it is everybody else’s problem).
Now I don’t know if looking at emergency loans provides a comprehensive picture of the overall assistance back in ’08. After all, the Fed also took on derivative positions and bought toxic assets, so this table may actually be discounting a large multiple of BS factor .
Also, looking at the “beneficial” effects of the bailout simply on the number of staff positions saved is an incomplete analysis. After all, many of the bailoutees were highly interconnected entities whose failure may have caused even more staff positions lost in the economy, whether directly employed by the bailoutees, or not. (A failure by one of these guys has a negative effect on the viability of companies like McD’s, whose business operations are facilitated by the financial system). So the table may also be overestimating “BS factor”.
If there's anything to learn in this exercise, it’s nigh impossible to calculate the effectiveness multiple when we are talking about bailouts – you get lost in all the layers of BS.