Most economists accept that the nation’s financial crisis ”” the worst since the Great Depression ”” has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it. The Treasury’s proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.
“At first it was, ”˜thank goodness the cavalry is coming,’ but what exactly is the cavalry going to do?” asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. “What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions.”
The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. ”” himself a product of Wall Street ”” carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer’s bill.
There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions. Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.
Seeing Raines, Johnson, Schumer, Dodd, Frank, and Gorelick, for a start, get the full Ken Lay treatment, including the perp walk, would do wonders to clear the air.
What troubles me is that there are so many people who have gambled foolishly and/or profited greatly from this who should be held accountable. For the free market to work, there needs to be consequences for bad decisions. This bailout would appear to be government intervening to take away the consequences for previous reckless and bad decisions. If that needs to be done to save great harm to the nation, so be it, but then another consequence MUST be substituted to punish the reckless and bad decisions (and therefor deter future bad decisions).
A couple years ago, a Christian mortgage broker tried to convince us to go with one of these “0 down” mortgages. However, we didn’t because the mortgage didn’t pass our “smell” test. We remained renting because we realized we couldn’t afford to buy a house. If others – be it people who figured they could buy a home when they couldn’t afford it, or Wall Street investors who figured they could get rich quick on bad mortgages – made stupid financial decisions, responsible citizens should NOT be expected to bail them out for free.
So I am fine with a bailout to save the economy. But I would agree most strongly that there needs to be negative consequences for bad decisions, and some kind of restitution.
The Third Internationale defined fascism as: “Fascism in power is the open, terroristic dictatorship of the most reactionary, the most chauvinistic, the most imperialistic elements of finance capitalism.”
The majority of Marxists, even those who were not members of the Communist International, agreed with this definition. Marxists argue that fascism represents the last attempt of a ruling class (specifically, the capitalist bourgeoisie) to preserve its grip on power in the face of an imminent proletarian revolution. Fascist movements are not necessarily created by the ruling class, but they can only gain political power with the help of that class and with funding from big business. And, once in power, fascists serve the interests of their benefactors (not necessarily the interests of capitalism in general, but the interests of those specific capitalists who put them in power). Leon Trotsky elaborated on this view in his collection of essays, “Fascism: What it is and how to fight it”:
And Paulson wants to have total, irrevocable control over the megabucks needed to bail out the Corporate clique. Well, Mussolini made the trains run on time.
The historic function of fascism is to smash the working class, destroy its organizations, and stifle political liberties when the capitalists find themselves unable to govern and dominate with the help of democratic machinery.
And, what Trotsky failed to perceive is that the fascism that he would fight would be replaced by an equally totalitarian system. What evil lurks in the hearts of men – the Shadow knows! eh eh eh.
Ah yes, a public hanging.
Then all of the bad history and the bad things will ‘go away.’
If people were/are criminally liable then, by means prosecute. But, chasing down the guilty and punishing them will not resolve systemic problems.
Only well-informed, well thougth-out and non-partisan measures can resolve those problems.
Anybody want to take a bet that our politicians are willing to engage in such measures for the ‘good of our country’ rather than the ‘good’ of their personal political careers or the ‘good’ of that ‘sports team’ that they call a political party?
Now see here: The traditional punishment for wretchedly bad financial decisions has been to find oneself homeless selling pencils on a streetcorner. The current crisis is largely due to generations of Federal messing around in the economy; I really don’t see why anyone would think that more bailouts and regulation would be helpful.
Markets solve their own problems permanently and brutally. Governments paper them over prettily and gently, but the problems always burst out again much larger. How much more papering over are we willing to pay for to avoid the inevitable?