20 September 2008

More on the Bailout Swindle ...

You can see it coming. Representatives of big finance will meet with government officials and cobble together a bailout that will socialize bad debt and leave the rest of us to pay the bill. Such an arrangement - despite its obvious mal- distributional consequences - will be presented as working in the "common interest." Any effort to speak up on behalf of protecting the government treasury by insisting that the banks, investment houses, insurance companies, and so on who've made systematically poor economic decisions actually pay for being rescued will be branded "political posturing." So too will any claims that are pressed on behalf of those down in the lower reaches of the economic food chain. If you want some flavor of how the debate will go, here is the AP report that The New York Times is running at the moment. Some of the good bits:
"The Bush administration is asking Congress to let the government buy $700 billion in toxic mortgages in the largest financial bailout since the Great Depression, . . . The plan would give the government broad power to buy the bad debt of any U.S. financial institution for the next two years. . . . The proposal does not specify what the government would get in return from financial companies for the federal assistance. . . . The plan is designed to let faltering financial institutions unload their bad debt on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences. . . . Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures. They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility. Asked about the chances of adding such items, Bush sidestepped the question, saying only that now was not the time for political posturing. ''The cleaner the better,'' he said about legislation he hopes Congress sends back to him at the White House" (stress obviously added by me).
What the administration is peddling is an old time formula - socialism for the rich, free markets for the rest.

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Blogger Pac Mclaurin said...

One of the more recent approaches to limiting the size and scope of government has been the "starve the beast" approach. The current bailout moves this to a new level-"eviscerate the beast." This is much more than just the upward re-distribution of government money. It is as if those who have already profited immensely from the Ponzi scheme-like handling of mortgages in this country have been invited to rent Ryder trucks and back them up to the already near bare coffers of our nation's wealth and get another load of wealth. Stuff does indeed trickle down!!

21 September, 2008 11:15  
Anonymous Anonymous said...

I hold a different view on this issue. I think Paulson and Bernanke tried, as much as possible, not to intervene, and I believe their efforts to negotiate a private sector solution were in earnest. The fact that they let Lehman go, and were planning to let Merill go too, makes me think as much. When AIG crashed, however, all hell broke loose. I don't think people realize how close we came to a complete meltdown of the financial system this past Monday. Inter-bank lending came to a screeching halt, the Dow dropped 500 plus points, and all the investment banks were in a free fall. The band-aid approach simply wasn't working. A comprehensive solution was absolutely necessary, or our economy would have imploded. This is not about the bankers and Wall Street, anymore. The investors and shareholders of these companies are NOT getting bailed out. The opposite: they're getting wiped out. Heck, the Feds now own an 80% stake in AIG. They may actually stand to make money on this deal. Believe me, an 80% stake in the largest insurance company in the world for $85 billion is actually a sweet deal considering AIG has assets worth at least a trillion. This bailout (inappropriately named, in my opinion) is to rescue the pensions, 401ks, portfolios, and savings of regular folks. If the govt didn't decide to take these illiquid assets off the banks' hands, those entities would be gone, and you can imagine what a catastrophe that would be. It's a sad situation brought about by the the greed and cowboy culture of Wall Street, the irresponsible consumers who took on loans they have no business taking, and the regulators who were asleep at the wheel. Not acting to save the very system we rely on to manage our savings, to finance our homes, to invest for our retirements... would make things much, much worse, though, and fast.

21 September, 2008 13:20  
Blogger Pac Mclaurin said...

So where does that next trillion dollars come from? Are each of us going to pony up the approximately $2000 per man, woman and child it represents? Shall we print it and go back to the wild inflationary times of Carter and Ford? Or should we borrow it from China and Japan who already have notes equivalent to over 50% of the value in our country's debt? You and I are viewing this from two sides of the world, perhaps even two different mindsets..when your country has allowed itself to run into the ditch this way, it is difficult to find a scheme to get back on the road. The current proposal is an untried, untested scheme that stands to hurt many people.

22 September, 2008 07:33  

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