Wednesday, September 24, 2008

When the vast majority of the public and a sizeable number of members of Congress balk at the bailout, they are told that there is no alternative and they simply must accept the deal, so how could it be that the financial institutions who stand to benefit from the bailout might reject it? We are supposed to be on the verge of catastrophe, and presumably no one would be more aware of how close we are than these very institutions, but the government has to sweeten the pot enough to get the institutions to participate in the rescue? Supporters of the bailout insist that we need to throw a lifeline to drowning banks, lest they pull all of us under with them, but we still have to give the banks enough of an incentive to grab on to the lifeline? One might think that being offered rescue would be enough incentive. If the consequences of rejecting the plan are as bad as the administration says, why would the plan’s primary beneficiaries not jump at the chance to have the government purchase these toxic assets? If they wouldn’t jump at the chance, doesn’t that suggest that things may not be quite as bleak as we are being told? Isn’t it then reasonable to ask why Congress and the public should be railroaded into accepting a deeply flawed plan?
daniel larison, over at amconmag

tony fratto kind of gave this away at a presser earlier this week, and it made me wonder then (as it makes me wonder now) just how insanely urgent this whole catastrophe really is. if the drowning man turns down the life preserver because it means he has to swim in a cheaper swimsuit the next time he dives in, he's probably not really drowning.

i do think there's a need for some bailout money, but i don't think it should be aimed at wall street. those guys should all have known what they were getting into, and if they didn't, or did and didn't care, then they should suffer the consequences.

myself i think any government intervention has to start with individual mortgage holders, people who might be able to stay in their houses if they could renegotiate their predatory loans. for one thing, it actually helps people that need help. for another, presumably such an action would help to stabilize the securities market because it would make it easier for banks and rating agencies to accurately value these incredibly abstruse investment vehicles, which presumably would help unclog the credit markets, which are chock-full of money (where the hell else is the government going to get that $700bn, anyway?) but are scared to lend it because nobody knows what's on anybody's balance sheet.

if the government wants to buy into these companies at fair prices for an equity stake, and advocate for good governance of them, that might be one thing, but to give the former chairman/ceo of goldman sachs a giant bag of money to hand out to all his buddies that helped him screw the whole thing up is just stupid.

the parasite class has sickened the body politic enough. time for a robust immune response, even if we have to go through a little fever sweat and puking.

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