Leaving aside the politics for a minute, consider whether the bailout makes financial sense:
1) Taxpayers need to fork over $700 billion dollars to people whose idea of prudential banking was to underwrite liar loans.
2) The price of the bad loans will be set by the bankers.
3) Taxpayers don't get any collateral in the form of stocks in the financial companies either, so they won't share in the profit.
4) You can not insist on changes in the way these banks do business.
5) How big is $700 billion dollars? It's twice the cost of the Iraq war. Using $700 billion, you can provide provide universal health care for six years. It's enough to pay the cost of universal preschool (one of the best educational investments this country can make) for 25 years.
No half-awake investor would ever go for such a deal. Why should my government enter into such a deal on my behalf?
p.s. I started this as a comment, but decided that it could stand on its own.
I'm not versed enough in economics to unravel the consequences of this bailout, except I think it's a terrible idea to give one person (the chairman of the Fed) carte blanche to make decisions with such a huge amount of money without the possibility of oversight or accountability (as currently drafted in the proposed law). I'm also looking for parallels in world history where a government instituted a system of unregulated free-market gambling to be insured by taxpayer subsidized bailouts (when figuring in the "golden parachutes", it amounts to a system of upward redistribution of wealth).
ReplyDeleteThe one thing I understand is that between the Iraq war, the breaking tidal wave of entitlements in Medicaid and SS, the current sub-prime mortgage banking crisis, and the promises of both parties for further tax "rebates", entitlements, and government spending programs we can't afford, the house of cards we call the US economy can't possibly stand up much longer.
I wasn't around in late September and early October of 1929, but as I recall my history lessons, there were wild swings from day to day in the markets in the month leading up to the collapse. Hmmmm.