Bailout Brainstorm: Ignorant Questions from a Confused Citizen
First, my economics credentials:
* I read The Worldly Philosophers twice. For fun. So I thought I might like to major in Econ.
* I got a C in the only Econ course I ever ended up taking.
Now, let me conduct today's emergency test of that saying uttered by nurturing teachers everywhere: There are no dumb questions.
Now that the House has rejected the $700 billion bailout proposal, here are my (possibly dumb) questions. Feel free to comment below and add your own questions. Maybe something we ask -- even something dumb we ask -- will trigger a useful idea in the brain of someone who actually understands this stuff.
Question 1: Are we likely to be back in this position again if we send a $700 billion message that America is a country that bails out companies that take reckless risks?
Question 2: If the Titanic is sinking, do you spend $700 billion trying to fix the Titanic even as the water is pouring in? Or do you spend $700 billion on rescue ships, lifeboats, a replacement ship with a stronger hull, iceberg-detection research, fabulous new modes of transportation that will carry passengers more safely and quickly to destinations nobody has even dreamed of yet, etc.?
Or to put it a different way, what if we didn't use $700 billion to stop the financial services industry from sinking? What if we used it to make new things soar?
Again, this may be an utterly foolish idea, but I hope somebody with a fancy calculator is at least considering what $700 billion could do for the American economy and for the portfolios of everyday investors if it was used for:
* loans to small businesses
* building new infrastructure and repairing old infrastructure
* startup loans for entrepreneurs with fresh ideas for alternative energy
* loans (oh hell, let's be bipartisan here) to fund construction of offshore oil rigs
* startup capital for people who want to open brand-new banks that voluntarily agree to abide by more sensible lending guidelines than those required by current regulation
* college loans (perhaps targeted toward students interested in studying to become scientists, engineers, teachers, etc.)
* so-called "commercial paper," which as I understand it is the run-of-the-mill credit many businesses count on to keep themselves going
That's it. That's what I've got.
I have places to be. Like five minutes ago. And my other questions are every bit as ignorant. But I wanted to get a conversation started. Join the brainstorm. Add your comments.
Thank you.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
It was absolutely new to me that the Titanic had $700 billion on board. And I wasn't even aware that the captain had sent a repair order to a dry dock while his ship was sinking instead of calling an SOS. But I guess I just don't know anything about the Titanic.
What I do know is that
1) $700 billion is not going to help. But we have already spent much more than that. And we will spend much more still.
2) If nothing is done to stabilize the system, it's Main Street that is going to suffer most. Wall Street will just write it off and then fly to the Bahamas for vacation.
3) The economy is very much like Humpty Dumpty. Once it breaks one can not put it back together again.
4) To throw Humpty on the floor to punish Dumpty is childish. But that is essentially what "let it fail" proponents are asking for.
Well the progressives want to go for the Swedish solution which I hasten to add, seems simple. Basically it is this: bail-out the depositors (which prevents a credit contraction) while sacrificing the equity of a bank whose depositors had to be bailed out.
In the Swedish crisis the unintended consequence was that banks did all they could to avoid going under with their equity being wiped out and their operations being overtaken by the government. And this was a good thing. Only one bank was taken over by the Swedish government, it was the Gota bank.
I agree with you completely. I was just thinking some of the same thoughts. The government could lend directly to the honest small businessman -- rather than giving the money to the crooks. The government could fund student loans. And how about bringing back laws against usury. 5% interest tops. Bring back the bankruptcy laws that once allowed the ordinary person to declare bankruptcy and get a clean slate. The economy is not going to be revived -- as long as people are tapped out and have no money to buy anything.
Why are we bailing out these guys?? I need more than "it's gonna get a whole lot worst". Yea, I've heard that one before, sounds like the run up to the war. Bush and company are working on securing their moneys, their power and spoiling the pool before they leave Washington. Nothing else is going on, pure and simple.
My big question is why is Obama going along? Time to lead. Time to examine the situation and use that college degree. Time to protect the middle and lower class. Time to use that money on the bottom tier of the population, which should be referred to as the foundation of our economy and stop this pissing downward analogy. Oh, excuse me "trickle down".
Um...can't we freeze all the "personal" assets of the Lehman boys, Goldman Boys, Bear Boys?..lots of yaghts, lears, trump tower condos.... then...file criminal charges for selling snake oil to the world..it wouldn't come to 700 billion...but it WOULD be many billions..just to help out...AND then...send the slugs to prison...and when they get out..they will have NOTHING..but a framed Wharton MBA Certificate.
You hit the nail on the head in my book, David. Money is supposed to be used to DO something, and the "something" needs to be useful to someone. It needs to be used to build or to produce, not just to obtain.
You're right: bail the losers out and they'll just keep losing. Reaffirm that "money is available in endless supply from the Full Faith And Credit Of The United States Magic Piggy-Bank Company," and human greed will take its course. It's just our nature.
The best way to use money is "leverage." A little money, wisely applied, is like the well-placed fulcrum of a lever. There's a vast amount of industrial infrastructure still in this country. Shipping goods and services from sweatshops 10,000 miles away is, and always has been, stupid for ALL concerned.
"This is the United States. This is US. We can do better."
Let Wall Street fail !!
All you people who were happy that wall street was failing, congratulations !! I know you are right that main street wont be affected at all.
Now is not the time to try and reconfigure such an enormously complicated system. It's highly unlikely that the same asinine behavior that brought us to this crossroads, is about to be repeated. Public funds have already been spent ($150 Billion?), and will continue to be spent in an ineffective, piecemeal effort to staunch the bleeding and prop up the markets. In effect, you can commit the $700 Billion to a unified and coordinated plan. or wind up doling it out in emergency infusions over the next 12 months with diminished effect.
Fear and uncertainty are the real enemies. They compound negative events. They take no prisoners, and are completely irrational. They are rapidly escalating right now, around the globe.
Are you kidding me that this will not be repeated, look at the S&L mess and John McCain, never met a deregulation he didn't like... and ENRON..
These people think it is their job to GAMBLE with OUR MONEY... We bailed out the S&Ls and they are holding our feet to the fire on this one.
I just do not believe that this amount of money 700 billion, will be enough and that is why I would like the bailout targetted to JOBS and HEALTHCARE...Those are the big root causes for this mess, along with HIGH interest rates..
I've also heard suggestions to give every taxpayers an infusion of money, like say $1 million. That would certainly start up the economy and get people facing foreclosures back on track. But even a much smaller amount leaving plenty for some of your suggestions would be a big help to people and give them a hell of a lot of confidence in our government and this leadership.
yea! a place to put in my ignorant questions! first one: why doesn't the government issue treasury bonds? hillary suggested issuing war bonds for the iraq war, why can't we issue treasury bonds for the bailout? of course, it wouldn't come close to covering the 700 billion, but it seems like alot of people would rather invest in a sure thing right now. plus, i figure, i'm paying for the bailout anyways, why not get a bond certificate out of it?
another ignorant question: why doesn't the government get down on both knees and beg ceos with a really good track record to meet and figure out what to do about these failing corporations? i would trust bill gates' opinion on what to do with freddie & fannie way more than henry paulson's & george bush's.
Um, could you suggest a better CEO? I wouldn't trust Bill Gates to walk my dog, I would find out he loaned my dog to Michael Vick for a small fee, and then returned my dog to me "good as new," except for the being dead and torn to shreads thing...
The suggestion is sound, but good luck finding a good CEO, they are rare as diamonds and harder to find.
i don't know what is going to happen if no bill passes and i doubt anyone else does.
i myself was foreclosed on this year and blame no one but myself; i had purchased a modest home in 2000 with nearly a third down, and everything was swell until a few years ago. i refinanced when prices were up and local houses were selling like pancakes. i made needed improvements to the home with a plan to sell it and move back to where i'm originally from. but then things started to slow down. the house was on sale forever and hardly anyone came to look at it. at a point when i thought i would be gone, the mortgage payment went up and i got a second job, but couldn't hold on. i eventually wound up losing all my equity. my bank, the mighty jp morgan chase, sold it to an investor the day of my foreclosure and broke even. so yay for them!
i feel guilty, esp. when i visit my things in storage. i have dreams where my dead relatives come and upbraid me for this turn of events. and now i feel exponentially guilty, like i am suddenly to blame for the potential collapse of the world markets and the end of capitalism as we know it. wow.
whatever happens, i do think we need to regulate the banking industry. there were many strong-arm sales tactics used by market "professionals" in my once-happy town.
I think for any bailout plan to work, it will have to be simple. While it is noble to provide start up capital for entrepreneurs and loans to small businesses, it is incredibly difficult and probably stupid to do this without any infrastructure (it would probably amount to the same thing as dumping money from a blimp). Similarly, i am not sure how easy it would be to create a bank over night. It is difficult to merge two companies with different employees, cultures, business models, etc or to create businesses piecemeal. In the long term, there is no doubt we need better legislation to prevent excessive risk taking and undeserved executive compensation. Right now, however, we need a short and sweet plan to restore capital to our financial institutions, regeneration liquidity, and keep credit available. That is just my two cents.
David,
i'm with you. I don't live in your fine country but unfortunately for the rest of us what you do ends up affecting us. So.... my thought about it is....if you want to spend $700 Billion dollars that you don't have, why spend (waste it) on wall street. Take the money and start rebuilding your infrastructure, build dykes, roads, public transport, fix the airports, invest in alternate energy etc. This way the money goes to people who need it and some actual things get done....that needs to be done anyway. When the companies on wall street go belly up, see how the new unemployed CEO's like it on unemployment. Hopefully they have enough going for themselves that they can get a job as a laborer on a construction site.
Has anyone considered that frightened owners of 401Ks who panic and withdraw their funds are leaving at least 30% of their money behind. That money is going to taxes and penalties that benefit the government coffers. For years American workers have been encouraged to participate in these retirement savings plans and we have. We have pooled our money and have fed the markets. The current administration and financial industry has conspired to rob the tax payers in a big, big way. We have all been duped and I am mad as hell.
ok, I'll bite.
who is going to be doing all this with that $700 billion? is there an existing agency with the capability to lend money to the "small folks"? if not, can one be ready by Friday? nb: I'm even more ignorant of economics than you are, but I really hate watching our 401K go down the drain *again.* I really don't care whose fault it is, but it seems to me that a band-aid to keep the existing system from bleeding to death while we work on alternatives/regulatory oversight fixes/reworks is better than the alternative. I'm just afraid that we've cut off our noses to spite our faces with the rejection of the bail-out.
You must be logged in to comment. Log in or connect with
