Legal Commentary

Say No To The Bailout

By Big Tent Democrat

Too busy to engage the issue, but Democrats must say no to the proposed bailout as announced today. It is simply unacceptable. Krugman explains:

[H]istorically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. . . . The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions.

More...

This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

Unacceptable. Democrats must say no. And say yes to HOLC.

By Big Tent Democrat, speaking for me only

Full post as published by TalkLeft on September 20, 2008 (boomark / email).