A Quick Word About the Bailout

Honestly, I think the government bailing out financial firms with unmovably bad debt is a terrible idea. Of course maintaining the health of financial markets (most especially credit) markets is of utmost importance, but I think this is a clear reflection of how powerful lobbying efforts by specific industries can be. Actually this is probably not the best example, since financial firms and Paulson/Bernanke are kind of the part of the same hive mind.

Below is a short speech by Representative Marcy Kaptur (Ohio Democrat) on what she thinks is a better solution. She is a bit crazy and sensationalist, but her ideas make sense:

I have some qualms with Kaptur’s ideas, mostly they’re too simple and don’t specifically address what to do with all of these securitized bad mortgages that are worth nothing. Given my lack of expertise, I can’t really come up with another solution for this problem apart from letting he market sort itself out, allowing the country to go into a heavy recession until all the firms who can’t afford to service their debt ar restructured (i.e. acquired by companies that can) or go bankrupt, and then start over. How can anyone be considering a plan in which the government plans to a) buy any debt which the financial markets, experts in valuation, deem unpurchaseable, and b) sell it in the future for a profit.

That’s bullshit. If Congress does pass this bill, then the American people need to write off the US$800+ billion as a loss and move on. Just pretend there was another war in Iraq, it cost about the same.

Kaptur also mentions a “new Glass-Steagall act” — more on that in the next post though.