Calling Out the Bailout Bullshit

I'm not an economist, but some very smart people who are are arguing that this massive financial-sector bailout is a terrible, awful, very bad idea.

Cato @ Liberty points to an essay in which University of Chicago School of Business Prof. Luigi Zingales concludes:

The decisions that will be made this weekend matter not just to the prospects of the U.S. economy in the year to come; they will shape the type of capitalism we will live in for the next fifty years. Do we want to live in a system where profits are private, but losses are socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held responsible for their decisions, where imprudent behavior is penalized and prudent behavior rewarded? For somebody like me who believes strongly in the free market system, the most serious risk of the current situation is that the interest of few financiers will undermine the fundamental workings of the capitalist system. The time has come to save capitalism from the capitalists.

Reason's Radley Balko compiles of a bunch of the general insanity surrounding the bailout and notes that this boondoggle will cost each American citizen at least $2,500:

Are you ready to shell out $2,500 to help Wall Street firms that made bad (often government-influenced and government-incentivized) decisions?

Doesn’t matter. You’re going to. Either through taxes or devalued currency. And that’s just until the next crisis, which is inevitable now that we’ve sent the message to big corporations that taxpayers will pay for their mistakes.

And don’t blame this on the free market. There’s nothing free-market about any of it. It’s corporatist socialism.

Maybe if I wish real hard, Sec. Paulson will announce a federal bailout of Radley Balko’s student loans.

I'm with Balko--I say it's way past time Paulson worked out a bailout plan for Christopher Patton's student loans, too.

Finally, as always, Glenn Greenwald can be counted on to rail against the lack of serious debate in the American government or media about whether the Bush administration's plan is really a good idea:

First, the fact that Democrats are on board with this scheme means absolutely nothing. When it comes to things the Bush administration wants, Congressional Democrats don't say "no" to anything. They say "yes" to everything. That's what they're for.

...

What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism -- where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded.

...

I don't pretend to know anywhere near enough -- in terms of either raw information or expertise -- in order to opine on the necessity or lack thereof of The Latest Plan in terms of whether the alternatives are worse. But what I do know is that an injustice so grave and extreme that it defies words is taking place; that the greatest beneficiaries are those who are most culpable; and that the same hopelessly broken and deeply rotted institutions and elite class that gave rise to all of this (and so much more) are the very ones that are -- yet again -- being blindly entrusted to solve this.

I guess it's a good thing I have this blog to rant on. At least this way it seems as though I'm doing something. Otherwise I'd feel every bit as powerless as I really am--as the vast, vast majority of us really are.