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Just Another Idiot
2008-04-14 03:28 pm (UTC)
There hasn't been much complaint about the Bear Stearns bailout because it was fundamentally a good idea. It went down because BS was otherwise going to default on their overnight loans (don't get me started on that practice) -- having a major investment bank go under with almost no warning would be Very Bad for the economy. If that had turned into a wide-scale equivalent of a bank run, we'd have lost savings, pension funds, the works.
But the bailout only works if investors are convinced that the Fed would do it again in the case of another overnight failure. The entire system works on trust, and as soon as trust goes away, people pull their money and we get serious problems. If we get presidential candidates saying, "Screw that, that's not the Fed's job" we risk exactly what it was trying to avoid.
I'm still waiting to see whether I *really* consider it corporate welfare, considering the stockholders got screwed. I'm want to see whether the idiots at the top of the company actually get held accountable -- which I think would also be very good for the economy, to know that people who take stupid risks pay for them.
I am not really a fan of financial market regulation. Not because it's not a good idea (they could certainly use some rules!) but because I think that it's not really a workable proposition. You'd either wind up with an agency that moves far too slowly to be effective, or a revolving door between financial institutions and the regulatory body that would enable it to work quickly... but paralyze it the minute it had to make tough decisions.
Personally, I think it would be far better to institute a bailout fund. Force financial institutions like Bear Stearns to pay into a fund that would then be used to bail them out if they fuck up. It wouldn't be insurance, exactly (insurance companies are notorious for stalling just when quick action is needed) more of a safety net. In exchange for paying into this fund, they could be given a freer hand to act as they see fit.
Now, that should have been coupled with low-income assistance, that's for damned sure. And it looks like they may well have been shamed into acting.
But before going off on the "subprime debacle" let's not forget that there is *plenty* of blame to go around. The fundamental problem was that people were getting loans that they just could not pay back, either because they didn't have the income, lost the income, or didn't understand that the monthly rate would change as interest rates changed. For everyone who lost a home because their lost their job or had a major medical problem, there seem to be dozens who were simply living beyond their means or just fundamentally did not understand how mortgages work. The banks can take the blame this time: they were greedy a hell and put in a position where they weren't held accountable. But this sort of thing is going to happen over and over again so long as the America population remains this woefully ignorant about how finances and the banking system work. I've been privately convinced that the next big crisis will be a credit card meltdown: but who do we blame then? I'm still waiting for a presidential candidate to start saying that Americans need to be better educated about money, but with people piling on Obama for being "elitist" that's not going to happen. (Gee, a Yale law graduate and senator is an elitist? Color me surprised. But hey, the last guy was pretty down-to-earth and anti-elitist. How'd that work out?)
Now, Bush's tax cuts? They're just stupid. Opposing them isn't liberal or conservative, it's just the responsible thing to do.
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Just Another Idiot
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