Private profits, public losses
By Doug Thompson
I’m a bigger supporter of bailing out Wall Street than most people who write for free weeklies.
Even I’m having a hard time swallowing this administration’s proposal.
I gagged over the weekend while reading we’re also expected to bail out foreign-based companies.
Many are heavily invested in the United States’ economy. Their collapse would be just as damaging as the collapse of a U.S.-based powerhouse. I get the logic. I’m just annoyed. If China went bust, would the Chinese government save American investors?
I think not. A buyout by the U.S. government would be more likely, even in China.
U.S. taxpayers are the suckers of the world.
On a more rational level, I can see the taxpayer being the buyer of last resort in a desperate situation. However, when we bail out a company we should buy out the whole company — the good and the bad parts. We should get it all at fire sale prices.
As Paul Krugman of the New York Times eloquently points out Monday, we’re proposing to buy the bad loans that the investment firms don’t want. We’re buying their garbage. The administration proposal would also give the Secretary of the Treasury more power than any one man should have.
Even Republicans in Congress are balking at this one.
Sometimes, the Romans believed, you need a dictator. However, granting the non-elected Treasury Secretary the power to buy anything he wants at any price and all at taxpayer expense and with immunity from the courts or regulators is something that threatens democracy, capitalism and the rule of law all at once.
None of that will make a difference if we’re all living in Hooverville, some will argue.
It does if you ever want to get out of Hooverville. The rich getting richer and the poor getting poorer may be the way of the world, but let’s avoid giant leaps if we can.
The Iraq War has cost about $460 billion to date, or a little less than $100 billion a year. The administration wants Congress to make a $700 billion to $1 trillion decision this week on the bailout.
What decisiveness. What assurance. What urgency. You’d think a hurricane had hit Wall Street and bodies were floating down the street. You’d think more lives were at stake.
New Orleans can get washed away, literally, and the president doesn’t even cancel his lawn party. His buddies on Wall Street need a bath, and he jumps up holding the towel, afraid they might get cold.
Where your treasures are, your heart will be also.
I have no confidence that the president knows what he’s doing. I have no reason to. The last people I’d grant even greater dictatorial powers to are the people in this administration.
“It’s the biggest amount of money with the least amount of detail I think I’ve ever seen in my life,” Douglas W. Elmendorf, a Brookings Institution economist who has worked in the Treasury Department and at the Federal Reserve, told the Washington Post. “The secretary does whatever he wants and spends whatever he wants.”
And what are the Democrats in Congress worried about? They want provisions to limit the pay and benefits to executives whose companies get a bailout.
Give me a break. That compensation may be obscene, but I’m not going to feel much better while paying my share of a $700 billion to $1 trillion buyout while knowing that some guy got $5 million instead of $25 million. Tax that obscene compensation. That will do.
Oh, by the way, that $700 billion or so will be financed. What we’re really talking about, at prevailing interest rates, is about $2.5 trillion spread out over the next 30 years once you figure in the finance cost.
I have no problem with fast action. Get a major bailout done now. Let all the regulation come in later legislation. Believe me, Wall Street isn’t going to get out of oversight this time. Not after this “China Syndrome” of a meltdown. However, don’t just push a brown paper bag at the taxpayer and tell him the economy’s going to blow up if he doesn’t fill it.
He may just look at you and say, “Let it blow.”