Seems Reasonable
This bailout thing is freaky, mad freaky. But this post seems eminently reasonable, and worth putting up in its entirety:
A great quote about the bailout comes from (of all places) the Wall Street Journal:
David Ader, government-bond strategist at RBS Greenwich Capital, notes that it is a politically difficult sell to go to voters and tell them you’re proud to have kept employed “many of the same firms that created the mess and paying more for their crappy securities than they themselves would be willing to pay. Vote for me.” [emphasis original]
One question: in debating this bailout, nobody seems to even consider a possibility that leaped out at me. If the troubles on Wall Street are preventing Main Street from getting responsibly extended, reasonably priced credit, why can’t we just end-run Wall Street? Take the $700 billion Mr. Paulson is asking for and start up, say, 10 new banks with it. Guarantee the deposits publicly with a better guarantee than the FDIC. They’ll have no difficulty attracting deposits. Then have them lend out money at conservative leverage (say, 10 to 1, much less than Citibank) and generate $7 trillion in new credit. Hire a staff from among the recently laid off, and management from, say, Japan, and pay them so that they only need to make 10 percent ROE (thus making a nice return for the taxpayers) and their bonuses only get paid out when it’s clear that the loans have actually been repaid. No derivatives, no fancy stuff, just plain vanilla lending. Main Street is saved, and the rest of us can find entertainment and moral improvement in watching Wall Street implode and disappear.
Let me point out where this wild fantasy comes from. To whit, everyone, including Mr. Bernanke, says that the ‘real economy’ will suffer without credit. Credit is apparently like, say, electricity and water — a health and safety issue for the economy. We have ‘utilities’ in electricity and water — so why not in credit? Some of those utilities are privately owned but heavily regulated; some of those utilities are publicly owned, at the local, state and federal level. And you know what? The publicly owned ones work just fine. In Los Angeles, I’m currently a customer of the private Southern California Edison, but previously I got my juice from Los Angeles Department of Water & Power. The bottom line: power from LADWP was half the price.
I’d love for somebody explain why it is apparently unthinkable for America’s taxpayers and borrowers to declare their independence from the current crop of moronic incompetents now masquerading as financiers. Remember, this is the same group of guys who misallocated credit (their supposedly core competency) on a scale unknown in human history.
How exactly did these bozos get to be so indispensable? Isn’t this indispensability entirely in the minds of Bernanke and Paulson? And doesn’t that make them, in the most polite terms imaginable, captured regulators?
