In Reply: More Thoughts on the Bailout

Jordan and I seem to have started a running dialogue about the current financial imbroglio. Neither of us, it should be said, is anything approaching expert about the situation, but we're both blessed with strong opinions about the situation.

In response to his first post about the meltdown, I noted that it was incumbent upon us to try to understand - as reasonably and rationally as possible - the current crisis. Jordan has since added some more thoughtful commentary, and I thought I'd take the opportunity to respond once again.

First, and perhaps most immediately, Jordan suggests that there's a reason to trust in our public officials. To that, I'd offer a very qualified support. I woke up this morning to the sound of Sen. Harry Reid's press conference. What struck me about the conference this morning was the fact that Sen. Reid admitted the overwhelming majority of constituents against the bailout plan; at the same time, in almost the same breath, he said that it was the job of the Senate to listen to their own council.

In other words, to not listen to their constituents. The strange fact of the matter is that he's right. The Senate, as it was originally set up, was to act as a kind of conservative bulwark against the twin evils of populism and general demagoguery, and I think it largely has.

I guess the root of my disagreement with Jordan is this: I can't bring myself to trust our public officials. Jordan does, to be sure, qualify his own optimism, but then goes on to say this in reference to a recent article in the New York Times: "I personally like some of the benefits of a Swedish-style socialist economy but it’s something that unfortunately would never fly amongst the majority of Americans." In sending him that original article, I wasn't advocating an American economy structured on the Swedish model, and I don't think the article was suggesting that the United States would be better served by hiking up taxes to such an extent that the government can provide all manner of social services.

The point of that article, I think, was to highlight the government's role in holding private corporations accountable for their errors. The market is, and should be, a private sphere. However, that said, the government has an important and fundamental role to play in regulating that market, and if the government is going to embroil itself - as it already has - in the bailing out of private money markets because it is in the public interest, then the private markets must be held accountable for their errors.

Regulation, oversight, and transparency. If my government is going to put me even further into debt with one fell legislative swoop, then I want to know that they are doing so in the public interest. Furthermore, I want that public interest to be at the expense of private shareholders. That, I feel, was the lesson to be taken from Sweden. If a bank or investment company is going to sign up for the government bailout plan, they should be required to forfeit potential profits; if they don't want to forfeit those potential profits, let them figure out how to recapitalize.

That's not going to happen, of course: If the business of the United States is, as Calvin Coolidge once deftly (daftly?) suggested, business, then the United States Senate has a vested interest in legislating business, not least because those businesses turn around to contribute their financial backing to political candidates. Talks are, it seems, back on track. Who knows what happens next.


Jordan M said…
Jordan here.

I really want to get on with my epic Ben Stiller post which, in these times, is much more important than this silly economy stuff.

"If a bank or investment company is going to sign up for the government bailout plan, they should be required to forfeit potential profits; if they don't want to forfeit those potential profits, let them figure out how to recapitalize."

I think that this would be the prudent and responsible thing for our gov't leaders to do yet, and you can see this in a few articles published in past days, this stinks of "socialism" to many of the Republicans in Congress.

Not only that, it seems that there are people willing to sacrifice our current economy for political gain. I have been mostly ambivalent to McCain and his white trash muppet but this recent crap over waffling over the debate. From the BBC on McCain's decision to attend:

"But he reversed his decision after some progress was made towards a deal."

No, he reversed his decision bc he realized his fans were wondering what the hell he was thinking and if he was stalling.

As someone who has had to deal with politicos on a much lower level with less at stake, I can honestly say that there are probably some people out there who are in these sessions that are using ideology and party politics rather than logic and the facts of their 'expert' advisors to make decisions.

However it goes, we do have to trust that the majority of those in Congress will Do The Right Thing, or at least something that will work for the time being.

Back to Stiller...

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