Wednesday, 1 October 2008

Bush/Paulson Bailout: For & Against

To summarise a week of reading about the Bush/Paulson bailout:

Reasons to oppose this Bailout:

  • Section 8 of the Bill hands quasi-dictatorial powers over the US economy to Paulson (Link); there is no trace of oversight.

  • The amount of US taxpayers' money available for use in the purchase of mortgage related assets is not limited to $700 billion. (Link)

  • The Bailout is a sticking plaster, not a cure (Link) - yet the provisions contained in the Bill are not time-limited.

  • 200 economists have signed a petition denouncing the bailout as unfair, unclear in its effects, and dangerously short-termist (Link).

  • The Bailout creates a significant moral hazard: Banks that have acted irresponsibly to gain enormous profits during the boom must also bear the losses, or there is no disincentive to a future repeat of the events of the past decade, since risk-takers will be confident that Mommy Government will be there to pick up the bill should their gambles fail to pay off.

  • The above problem would be ameliorated rather if the terms in some way punished the executives of banks and financial institutions that are 'bailout'. This is not provided for; apparently this is not Paulson's intention. (Link)

  • It does nothing to assist (or even 'bail out') the homeowners who have been foreclosed or are at risk of foreclosure because of the same bad mortgages that are at the root of this 'crunch'. (Link)

  • Republicans as much as admitted that their support for it was a ruse to snare Barack Obama and the Democrats into taking blame for the effects of its passing. (Link)

  • The American people oppose the Bill, because they see it - not without justification - as handing their money to 'fat cats' on Wall Street. Its failure in Congress was a demonstration of representative democracy functioning correctly. (Link)

Reasons to support this Bailout:
  • PANIC!!!!!!!!!!!

Cross-posted at Daily Kos


UPDATE (01/10): Shortly after this post was written, the text of the new Bailout Bill, HR-1424, that will be voted on in the Senate later this evening, was made public. It could scarcely be more different - this new Bill is 451 pages long! At a brief reading of the summary, it looks like although there are improvements in some of the areas mentioned, it remains a decidedly poor deal for average Americans, particularly if the 10% surtax amendment fails.

22:02PM - Wow, Obama is really trying to sell this new Bill to the Senators and the American people! I haven't heard a statement like this one for a long time. "If American taxpayers are going to finance this, they should be treated like investors".

Update Hat-tip: Boatang & Demetriou

4 comments:

TBRRob said...

Agreed -- it's a stupid idea. I hope they don't get away with it.

But if you watch the BBC. You'd think it was essential for our very existance.

Obnoxio The Clown said...

I have a horrible feeling this will be like the EU ... they will keep voting until they get the answer they want.

QT said...

Cut & pasted comment spam above deleted (for some reason the post completely disappeared this time, rather than leaving the 'This Comment Has Been Deleted' message).

John B said...

"The homeowners who have been foreclosed or are at risk of foreclosure because of the same bad mortgages that are at the root of this 'crunch'."

You mean the people who lied to get the money to buy things they couldn't afford? I suppose if we're bailing out the rich crooks we might as well bail out the poor crooks too...