Bailing Out the Yachts

There’s just no choice we are told. We must must must rush to bail out Wall Street right now or most of us will be queued up at soup kitchens on Main Street by Christmas. And for many Christmases to come. Any of us daring to say 'wait a minute' clearly don’t understand basic economics. We should get out of the way. To suggest that it would be wise to make ALL the congressional Republicans cast their votes on 'the deal' before any Democrat says 'aye' indicates a death wish for November 4. The boat is full of holes and already down at the stern as the water gushes in. Refusing to dash for a bucket means we want everyone to drown. Any declarations that perhaps it’s a yacht we’re being asked to rescue - while smaller boats sink all around us - smacks of class warfare. Pay attention to the economists, we’re told. OK. What are they saying? Robert Reich, author of Supercapitalism and former Secretary of Labor, is skeptical about: The Deal There will be some skirmishing over whether homeowners in danger of losing their homes should be given some breaks, but here too it's important to watch the details. Wall Street doesn't want any provision that allows distressed homeowners to wiggle out of their mortgage obligations, even though Wall Street is wiggling out of its own bad debts. Congress knows the public is furious. That's why it's insisting on the above-mentioned provisions. But Congress and the Administration, and Wall Street, also know that the public -- and the media -- can easily be hoodwinked into believing that certain limits and protections have been built into the deal when, on closer inspection, they haven't. Wall Street is masterful at creating the appearances of value when there's no value there, and many of our representatives in Congress are well-versed in the art of creating the appearances of public gains when the gains are mostly private. 150 Economists Petition in Opposition to the Bailout Plan: If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity.  Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted. For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come. Dean Baker, author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer  and co-director of the Center for Economic and Policy Research, says: No Bailout: Stop Rewarding Incompetence There is no doubt that the world financial system faces unprecedented strains as a result of the incompetence of our business and economic elites. The collapse of the system of finance that we started to see last week would be a genuine disaster. ... However, we did get through the crisis last week with quick actions by the Fed and Treasury. There is no reason to believe that with comparable steps in the future, coupled with the raising the $100,000 limit on deposit insurance, as suggested by Jamie Galbraith, that we cannot keep the financial system operating. Keeping the financial system alive, but in the intensive care unit, is not desirable. However, given the integrity and the competence of the individuals involved, it may be the best option. James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too and chair of Economists for Peace and Security, says what we’re getting is: A Bailout We Don't Need The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called 'loans.' With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that