Should the government implement a financial bailout, unprecedented in its size, to protect the economy?
Our choice is being framed as either a costly bailout or suffering some very ugly economic consequences. I don't know which is preferable because the public has been provided with little insight about either choice. Does anyone really know the precise cost of the planned bailout? Of course not. Will the bailout--whatever its final cost--actually succeed such that our nation's financial institutions are healthy again and the economy is rosy? Highly doubtful. Most likely, this bailout will prolong our deteriorating economic situation--rather than cure it. On the other hand, to allow yet unspecified things to collapse as they naturally would without any further intervention could mean a very rude surprise for our entire nation (and perhaps the Western World). Nevertheless--perhaps--the wiser choice for the nation (excluding the financial sector of Wall Street) is suffering the consequences now, and getting on with a fresh start.
As of today, September 19, 2008, Bernanke and Paulson seem to have sold the concept of 'avoidable doom' to a meeting of a handful of Capitol Hill leaders, the highest echelon of our legislative branch. The group was informed of the proportions of the utter financial disaster that will result if newly proposed legislation, a bailout of the financial sector of our economy, doesn't occur immediately. Senator Chris Dodd, head of the Senate Banking Committee, who attended that meeting said that "the oxygen went out of the room" when Bernanke and Paulson explained that a crisis supposedly exists and how dire are its probable consequences. When pressed, Dodd resisted going into detail about the existing crisis and its consequences, presumably not wanting to incite panic. Actually I have not heard anyone associated with the government be specific about the circumstances and reasons underlying the immediacy. In fact, Benanke and Paulson may have oversold the urgency. After all, the real estate markets, credit markets, and other aspects of the financial system have been known to be in a meltdown for many months already. What exactly is the rush? Explain it to the public. Before another dollar is appropriated (additional to hundreds of billions of fiat money already pumped into the financial sector), at a minimum, the powers in control in Washington should make a full acknowledgement as to the extent of the crisis that has occurred on their watch. In other words, any interested citizen in the USA is entitled to a confession from their government as to how bad things stand and receive a clear explanation as to why a further bailout is appropriate.
A bailout this big, whether a savior or a boondoggle, shouldn’t be done in such a rushed fashion. I'm certain drafting such a massive legislative handout over one Saturday is rushing. If we are truly a democracy, before spewing hundreds of billons of dollars or perhaps upward of a trillion dollars out the Treasury fountain for a 'bailout', shouldn’t there be some public debate about what, how, to whom, and how much? And what benefit can be expected? Isn't there at least time to give careful, thoughtful consideration about the next steps? A trillion dollar legislative plan to resolve an extraordinarily complicated problem shouldn’t be hurriedly hammered out over a weekend by a few persons in one room.
On its surface, the bailout proposes to relieve all lenders holding bad mortgage paper of any adverse risk. The counterparty to that bad mortgage paper--the foolish borrower--will not have his debt forgiven. Perhaps--or perhaps not--the wiser choice for the nation (other than the financial sector of Wall Street) is suffering the consequences now, and getting on with a fresh start. Perhaps Congress should extend the legislative process to at least have some floor discussion among the people's representative. Can the ‘emergency’ really be that dire and urgent that its solution has to be legislated immediately? If so, why couldn’t our leaders have had more foresight and started planning this legislation much sooner? Personally, I think we should at least try to muddle along until the election and let the next administration fashion the solution. A presidential campaign presents an excellent time for the public to have a voice.
If you agree, pass your viewpoint or this item along to your representatives in Washington D.C. and your friends.