Bailing Out

The talk in Congress about the financial mess is very interesting in the way it obscures some basic ideas.  People act as though this is strictly a practical matter, a non-partisan, non-political, time-to-stop-arguing, let’s fix it now! question of simple financial mechanics.  In other words, there’s no ideology, no politics involved – just not relevant.

Well, a few criticisms of the plan that I’ve heard, particularly the comments of a former Secretary of the Treasury and one excellent letter to the NYTimes today, make me think otherwise.  The basic question is this:  If the problem was brought on by speculating in sub-prime mortgages, why not prop up those mortgages?  Pour money into the bottom, not the top.  Subsidize Main Street, not Wall Street?  If we bail out financial service firms, and home prices continue to drop, the USA, that’s us, will be left holding the empty bag. 

Could it be that it is more efficient to pour money in the top, to stabilize the markets, to restore confidence, to unfreeze the credit realm, and thus benefit all Americans by making the economy function again.  Could it be that time is of the essence? 

Or could it be that guaranteeing mortgages would also send a salutary shock into the system that would achieve the same thing, but it offends so many, especially Paulson and GWB, because it is bypasses Wall Street?

One person said that bailing out Wall Street this way by pouring in money is like filling a leaky bucket.  The bad mortgages are what’s draining the bucket.

Meanwhile, check out this wonderful animated tour of the Subprime Mortgage Mess.

2 Responses to Bailing Out

  1. troutsky says:

    “Guaranteeing mortgages” means what? No mortgage fails? No one defaults? Who is the guarantor? Why not just go to the next step and say “everyone who works deserves a home”? Why not a guaranteed minimal income for all citizens? This is the perfect time to socialize (pool) healthcare, housing, food and higher education. This is the perfect time for workers to demand just such a re-distibution but unfortunately they are nowhere near organized enough. Alas. But do you see how clear ideological lines are manifesting, like no time I remember?

  2. lichanos says:

    Guarantee an income? Fine with me. I’m all for it. Homes too.

    There are ideological fault lines coming out, but I’m not sure how clear the situation is.

    GWB – big government in favor of big business.
    House Republicans – mix of populist and laissez faire libertarians
    Democrats – big government with the “little guy” in mind…

    For all, “socialize” is a dirty word, unless it’s to spread the risk of the few to the many.

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