Bacon's Rebellion

Democracy Thrives in Sunlight

BAILOUTS FOR ALL

—

by

James A. Bacon
in

The comments on settlement patterns and housing are going on and on with good comments but several sub-threads make it hard to follow. We need Jim Bacon back to keep enough topics on the table so that the comments stay at a manageable number. We will jump in later to try to answer some of the questions, we may miss some, sorry.

Here is a new topic: Bailouts For All.

“Free market” folks must be in apoplexy over the news: a $200 Billion bail out here, a $200 Billion bail out there… The only times that the gambling venue called the NY Stock Exchange has gone up is on news of anther “big government” bailout or a collapse creating opportunity for bottom fishers.

You can see why we wanted to get “Good News: Bad Reporting (Jim Bacon’s 5 March post) before he left for Wyoming. Today, WaPo’s economic columnist Steven Pearlstein calls the current unpleasantness “the most serious financial market crisis since the Great Depression.” He makes some other points that are worth reading too.



Those of us who are concerned about the trajectory of society and the future of democracies with market economies can only shake our heads and ask: Why did not more people listen in 1973?

As you might guess, we believe Robert Reich has a number of answers in Supercapitalism.

EMR

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Comments

  1. Anonymous Avatar
    Anonymous

    We’ve got antidepressants in the water, don’t worry, be happy.

    The government knows how to print money.

    RH

  2. Larry Gross Avatar
    Larry Gross

    Bailouts for all is what happens when the government subsidizes and guarantees loans that are not 100% securitized.

    Virginia actually will not allow the State nor localities to invest public monies in investments that are not 100% securitized.

    This is like a “DUH” concept.

    What does this mean?

    Basically it means that Virginia will not deal with investments where the outstanding loan exceeds the value of the collateral.

    The Feds USED to have that policy in the past but monied interests managed to have that rule relaxed and that opened up the floodgates on ARMS.

    ARMS are fine.. as long as the loan company is going to bear the financial consequences having such loans fail….

    Where we went wrong was having the government essentially INSURE those loans.

    This is not new.

    This is deja vu all over again.

    We did this same thing when the Government decided to insure 100K Jumbo CDs.. regardless of how the money would be invested.

    Insuring ARM loans and Jumbo CDs is basically incentivizing and promoting risky loans.

    The Government essentially is insuring predatory loan practices where the loan amount exceeds the collateral.

  3. Jim Bacon Avatar
    Jim Bacon

    There’s not much that we humble citizens of the Commonwealth of Virginia can do to address the problems created by innovations and greed on Wall Street or the proclivity of the federal government to bail out billion-dollar speculations when bad bets threaten systemic financial collapse. When rent seeking occurs on a multitrillion-dollar scale, we are its inevitable victims.

    However, we can give some thought to protecting ourselves from the fallout. In particular, our government practitioners needs to be thinking about what it all means for the ability of state and municipal governments to borrow and repay debt. The Governor and the General Assembly agree on the advisability of issuing significant new debt in the near future, differing only in the amount. How prudent is it for state government to be adding to its indebtedness at this time? I have no idea.

    As this global financial crisis unfolds, are there other questions that we Virginians should be asking outselves to ensure a prosperous and sustainable economy?

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