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.
Labels: BushCo, political economy