Wednesday, October 01, 2008

Bailout Bill Bunk

Why should we support the $700 Billion bailout of Wall Street? While I understand that their failures can impact the economy as a whole so it is a bit of a scorched earth strategy to let them go down. They did their jobs poorly; they ran their businesses badly and the result of that is that they failed. And the people who caused the failures should not be rewarded and they should have a lot of trouble finding another job in that field. I’m reminded of President Ronald Reagan’s firing of the air traffic controllers – they paid for it with their jobs, and we all suffered a bit. How is this so different? Wall Street screwed up. Throw them out and bring in fresh financiers.

I don’t pretend to understand all the vehicles of high finance. But I shouldn’t need to. I’ve earned two graduate degrees, in Mathematics and in Management; if I can’t make some sense out of this in short order then it is intrinsically too complex. I haven’t heard anyone say that it is not too complex. That brings me to a second point: Why do we think that the bailout will either, a) be enough; or b) really be needed in the long run, i.e. we may either need to pour in more money to actually prop these institutions up; or there may be flat failures of some institutions but won’t others just become stronger – we’ve still got the same world, with the same natural and human resources. The financing is just an organizational framework imposed on those resources – a system of catalysts and rewards. Other institutions will fill those voids; people will work, technology will evolve – with or without a bailout.

So there’s one more point to make: we need to consider the source of the panic. This is coming from an administration that has lied to us, deceived us and denied us access to information on a consistent basis over the past eight years. They’ve used the excuse of “security” to pretty much do as they saw fit, from hiding their dealings with big oil companies to lying about weapons of mass destruction in Iraq, to not disclosing discussions in the White House of torture as an option. Now it’s "financial security" and it firstly effects their ex-colleagues in the financial world and they want to hand them a lot of money and see if it helps. I’m sorry; they’ve cried wolf too many times. Fool me once, shame on you; fool me twice, shame on me. Not this time, not now.

My own Congressman Bud Cramer makes a compassionate argument in his September 29 letter: "Without action, the store owner, the farmer, the homeowner and the senior have their hands tied and could lose their store, farm, home or pension." I haven't found the perfect analogy, let's try this one: paying "protection money" to a gang of thugs so that a store can stay open in a tough neighborhood and serve the locals isn't a proper solution -- clean out the thugs first and reestablish the store when you can.

David Corn posted the memo from Congressman Brad Sherman in his blog. Sherman is squarely against imposing this burden on the taxpayers: "...the Bailout Bill allows million-dollar-a-month salaries to executives of bailed-out firms, and it allows hundreds of billions to be used to buy toxic assets currently held by foreign investors."

That was a couple days ago. Now the Senate has loaded up the bailout with candy for everybody. If there was one good thing about the Paulson proposal it was that it was clean. Now we've got tax breaks and disaster relief melded into a banking bailout bill. No wonder we don't understand why things break. We let this crisis ferment for years and now we shouldn't panic to fix it with a barage of money and perks in just two weeks. No big bail out, just the FDIC insurance that was already in place -- oh, and let's make everybody play by the rules in the stock market, no naked short selling, for one; there's already a rule against that, the SEC just doesn't enforce it.

But no bailout, it's bunk.

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