No government bail-out of the banking system was ever going to be pretty. This one deserves support.
Saving the world is a thankless task. The only thing beyond dispute in the $700 billion plan of Hank Paulson, the treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, to stem the financial crisis is that everyone can find something in it to dislike. The left accuses it of ripping off taxpayers to save Wall Street, the right damns it as socialism; economists disparage its technicalities, political scientists its sweeping powers. ...
Spending a sum of money that could buy you a war in Iraq should not come easily; and the notion of any bail-out is deeply troubling to any self-respecting capitalist. Against that stand two overriding arguments. First this is a plan that could work (see article). And, second, the potential costs of producing nothing, or too little too slowly, include a financial collapse and a deep recession spilling across the world: those far outweigh any plausible estimate of the bail-out’s cost. ...
Mr Paulson’s plan relies on buying vast amounts of toxic securities. The theory is that in any auction a huge buyer like the federal government would end up paying more than today’s prices, temporarily depressed by the scarcity of buyers, and still buy the loans cheaply enough to reflect the high chance of a default. That would help recapitalise some banks—which could also set less capital aside against a cleaner balance sheet. And by creating credible, transparent prices, it would at last encourage investors to come in and repair the financial system...
The economics behind this is sound. Government support to the banking system can break the cycle of panic and pessimism that threatens to suck the economy into deep recession. Intervention may help taxpayers, because they are also employees and consumers. Although $700 billion is a lot—about 6% of GDP—some of it will be earned back and it is small compared with the 16% of GDP that banking crises typically swallow...
Mr Paulson’s plan is not perfect. But it is good enough and it is the plan on offer. The prospect of its failure sent credit markets once again veering towards the abyss. Congress should pass it—and soon.
Friday, October 03, 2008
The Economist: Bailout "deserves support"
The Economist endorses the bailout:
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Constituent Rebellion Now!
ReplyDeleteMillions wrote and called to say No! and still the Senate said Yes? It is time for a housecleaning! Time to show them that they work for Main Street, not Wall Street.
Based on quick analysis, it looks like there are 2-4 Senators who voted Yes who are in tight races, and 3 or 4 more who are vulnerable.
In the House, the analysis is similar, 7 or 8 vulnerable races where a little bit of influence might make all the difference.
Targeting these so-called representatives of the people, with print and radio ads highlighting their betrayal, could really make an impact on their chances for re-election -- and put the fear of constituency back into the Washington elite.
Are you interested in making it happen? There isn't much time before the election, so it will take funds and effort. Can you participate by offering time, skills or funds?
Let us know.
Contact the Constituent Response Team at constituentresponse@gmail.com.
Pass it 'cause it's the best we've got right now? No way. That means you should just come up with another plan instead, that WILL pass. They should have been doing that since the start!!!
ReplyDeleteAt this point, I dont care if its a turd in a box as written. The market is looking to the government for confidence and leadership, and if you vote it down now, you will just get more turmoil.
ReplyDeleteIf it is a turd in a box, after passage amend it, rework it, restate it, hold hearings on it whatever, just get it passed. Rembember the debacle this last monday when it was voted DOWN despite the repeated assrances "we have the votes"?
We had a 1.2 Billion dollar market swing based on that debacle. How much bigger will it be, and how much less confidence can we give to the entire world that is watching this with baited breath if we vote it down again? Again, pass the god damn thing and then fix it - just end all this uncertainty - nothing can function in a constant state of turmoil like this.