The Revised Bailout
Amazingly enough, despite all the hoop-la of how the bailout will pass, on Monday, it failed. It was quite entertaining to me to see a bill that everyone seemed so sure would pass, to just go and fail.
In the meantime I’ve found more than a few interesting links that only go to re-inforce my prior thoughts on the bailout.
The vagueness I noted in some sections of the bailout was quite intentional.
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
Ouch, well that sure is reassuring.
How’d they do? Pretty dang good. They made sure no pesky regulations would affect their golden parachutes, or reduce their paychecks, and they expanded the definition of what assets could be bought to extend beyond just mortgage related securities, to any troubled asset. If some bank has a laundry list of dumb investments that aren’t paying off well, they’re as eligible as anything else if the Treasury considers them at risk of failing (though even what kind of ‘risk of failing’ is required before the Treasury buys such assets seems vague).
Isn’t the point of the free market to let companies that do stupid stuff fail from it?
The NY Times also mentions that many of the financial institutions want to manage the assets that are bought as well, and get paid for it of course, which would generate them a very hefty profit as well.
I haven’t seen a lot in the mainstream media about the huge list of economists (over 165 and counting) who oppose the bailout, which is curious.
So far, this countries track record of hastily passing massive and far reaching pieces of legislation based on hysteria hasn’t worked out too well. It has resulted in a war and all sorts of legislation that is still having ill effects on basic liberties and freedoms. The revised bill which includes more bits to appeal to Republicans doesn’t seem any better, and is still co-written by the financial industry eager to get some more free money.
Ron Paul has some good thoughts on why the bailout is a bad idea, and Michael Moore has an amusing write-up of how to save the banks with plenty of good facts and of a few questionable ones (but overall a good read). I particularly like his #2 point for paying for the bailout.
I disagree with Michael Moore though, mainly because I think Ron Paul and the economists have the right point. Investors should not be subsidized. Investors making risky bets, should take their losses. They clearly want to keep the profit, let them keep the loss as well.
Regardless, I hope the new version doesn’t get passed as well, though given how disappointing the politicians have been for me and the fact that the general public got creeped out watching the investors having a fire-sale means that the financial industry will likely be able to get the new bill passed. Nothing like some hysteria in the stock market to help some legislation creep through.
Update: A rather interesting look at the distribution of wealth in America, figure 5 showing the difference increasing.
Update 2: I should note that the new bailout bill that has had tastier pork tossed in, increased in size by $110 billion, and in size from the 101 page version I read, to a new 451 page bill.
That pretty much negates the odds of most people having enough time to read it, and who knows what other tidbits got buried in it.