Spengler is on fire today. Excerpt:
America will give between US$700-$800 billion to the Treasury to buy any bank assets it wants, on any terms, with no possible legal recourse. It is an invitation to abuse of power unparalleled in American history, in which ill-paid civil servants will set prices on the portfolios of the banking system with no oversight and no threat of legal penalty.Why are the voices raised in protest so shrill and few? Why will Americans fall on their fountain-pens for their bankers? If America is to adopt socialism, why not have socialism for the poor, rather than for the rich? Why should American households that earn $50,000 a year subsidize Goldman Sachs partners who earn $5 million a year?
More:
Paulson's dreadful scheme will become law, because Americans love their bankers. The bankers enable their collective gambling habit. Think of America as a town with one casino, in which the only economic activity is gambling. Most people lose, but the casino keeps lending them more money to play. Eventually, of course, the casino must go bankrupt. At this point, the townspeople people vote to tax themselves in order to bail out the casino. Collectively, the gamblers cannot help but lose; individually they nonetheless hope to win their way out of the hole.Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit. ...Altogether, they'd rather gamble, and if that requires a bailout of the house, they gladly will chip in to pay for it. After all, today's baby boomers won't pay for the bailout. The next generation of taxpayers will pay for Paulson's $700-$800 billion. If that enables the present generation to keep borrowing rather than saving, it is no skin off their back. If home prices continue to collapse, the baby boomers will die in debt anyway, working at low-paying jobs until the day before their funerals.
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Okay, the "Where is America's Vladimir Putin" line at the end left a bad taste in my mouth.
Besides blogging about the Paulson coup, all of us might want to contact our representatives and senators to let them know that you oppose this plan. It might not help, but you never know, especially in an election year.
The thing to keep in mind here, Rod, is regardless of which lobbyist was connected to which politician, and whatnot, on Friday of last week (and the Friday before that) the total value of all the stock of all the banks was collectively about 1 trillion dollars.
For the price of the bailout, we could just BUY the banks outright (at a fair price for the shareholders), straighten out the issues with the bad paper (by tearing up derivatives), and then privatize them (by selling stock).
At the same time, because the Feds would be the owner of the mortgages (and the guarantees) they could pretty much put the mortgages on whatever terms they want to straighten the issue of an excess of foreclosures (without letting the speculators off the hook).
It would be ugly, it would be socialistic, it would work.
The plan in question is just a version of 'give the banks a lot of money and hope it works out'.
max
['Which is very nice for the bankers, I suppose.']
Max,
Your plan wouldn't work at all. For a mere trillion dollars, the taxpayer would earn the right to lose a trillion more. There's a reason these banks and broker-dealers are a "steal" right now.
The Putin line is a jab at the Russophobes who think everything Putin does is unjust and tyrannical.
America already has a man who will drive out the oligarchs who have stolen the country's treasure and debased its currency: Ron Paul.
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