The more I learn about this $700 billion bailout, the less I like it.
Paul Krugman says the bailout doesn't address the real problem, and will not work. $700 billion to Wall Street and we will still have a mess on our hands.
McCain is AWOL on this issue -- economy isn't his strong suite anyway. But Obama's supposed to be the clear-headed one. Why is he not using his bullhorn on this? Is it because his circle of advisers includes financiers who are the main beneficiaries of this bailout?
When you and I make boneheaded investment decisions, we lose our money. We can't go crying to Uncle Sam and ask for a bailout. Why should big Wall Street firms receive a bailout?
Actually, I know why they are getting a bailout. It's because they have bribed both sides of Congress and the White House. There's a revolving door that will carry Paulson and all the other people now in the government into Wall Street jobs when Bush's term ends. Wall Street gets a good deal -- for $100 million in campaign contributions, and $20 million in job contracts, they get a cool $700 billion. What a return on investment!
The most amazing thing about the $700 billion bailout is not the sheer scale of it -- it is that there are going to be no strings attached. Because the government should not dictate to private companies how they run their business. Really? So, why are the private companies lining up for my tax dollars?
Robert Reich has a few excellent suggestions:
The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.
Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.
If I were a private investor lending money to these guys, I would definitely ask for a stake in future profits and ask for better management. The government should do the same.
Paul Krugman says the bailout doesn't address the real problem, and will not work. $700 billion to Wall Street and we will still have a mess on our hands.
McCain is AWOL on this issue -- economy isn't his strong suite anyway. But Obama's supposed to be the clear-headed one. Why is he not using his bullhorn on this? Is it because his circle of advisers includes financiers who are the main beneficiaries of this bailout?
Obama has spoken out against the proposal:
ReplyDeletehttp://firstread.msnbc.msn.com/archive/2008/09/21/1430369.aspx
Looks like Obama is not really against the bailout. He seems to have no problem about socializing risk. Instead, his argument is that the bailout needs to be bigger -- it should also include people who bought houses they couldn't afford.
ReplyDeleteI think the government's role in this should be similar to the role of a judge in a bankruptcy proceeding: make the banks and homeowners agree on a new, lower mortgage so that the banks can write down their losses and homeowners can stay in their homes. But the government should not be in the business of buying off bad loans at the price the banks want for them .