No, that title isn't a mistake. It refers to an idea mentioned in a Ben Stein article, where he writes an amusingly logical piece asking just why we should trust Henry Paulsen with $700 billion taxpayer dollars, given that as Treasury Secretary he was supposed to be on watch for large, impending financial meltdowns, and has a former head of Goldman Sachs he was uniquely qualified to recognize a banking crisis when he saw it.
Paulsen has strenuously resisted any attempt for the bailout plan to stipulate Congressional oversight of how he would spend the money. Given the huge financial importantance of this spending bill to Main Street, and the fact that Paulsen and the Bush administration don't have much clout with either with Congress or with voters these days, I'm suprised that he would hang on so fiercely to that idea. I'm not suprised that he wants it; it represents an incredible amount of power that I'm sure is attractive to him.
But is a bailout of Wall Street the right thing to do? That's what Ben Stein asks, and one alternative is what someone in the office called the $700 bailout: what if we bailed out homeowners instead of bankers?
One final little thought bubbles into my mind: Maybe the bailout should not be of the banks at all, but of homeowners themselves. Maybe if we make the government the buyer of last resort of homes, we will stabilize the markets, stabilize the debt associated with the markets and take the gain out of the credit-default swaps for the speculators. Yes, price would be a huge issue, but so it is for Mr. Paulson’s plan for buying debt from banks.
Why not? We do it for farmers. Why not for the individual homeowner? Oh, right. Because Treasury secretaries don’t know any of those people.
Ben makes a good point here; I had always assumed that any kind of bailout would have to involve payments to the large financial firms instead of to homeowners because, logistically speaking, it's easier to write a few large checks than it is to write millions of small checks, but perhaps it wouldn't be beyond the means of our government. After all, the IRS already processes the annual financial records of most U.S. citizens-- couldn't we staff them up to verify who should receive housing assistance and who shouldn't? It would be no different than the stimulus package that was passed in the spring, except this time we could pass out mortgage vouchers. People could only use the vouchers with lending institutions, who would then turn them in to the government for cash.
The idea is, as Ben Stein points out, that it's worth thinking of a few alternatives to a bailout of Wall Street.
Comments (5)
September 29, 2008
11:14PM | #
i'd be more inclined to this argument if it didn't come from ben 'expelled' stein.
September 30, 2008
12:55AM | #
I normally don't get into political discussions, but Ben Stein is absolutely correct. The people who are getting bailed out are the ones who created the mess in the first place, profited millions personally and are still profiting. The American people need the bailout. Let these companies fail. Darwin's law, right?
On top of it, the American government stands to profit from this deal. Once the economy regains its balance millions of dollars will start flooding into our treasury as a result of these bailout deals. Why isn't there anything being said about how these funds will be appropriated? Who gets the say there? If we do bail these companies out then those funds should go toward lowering our taxes. WE ARE THE INVESTOR in this instance and we, the American people, should benefit if we are investing our billions into saving these companies. The way I see it, we will all be shareholders in these companies and should share in the profits (in the form of lower taxes). Will that happen? No. Will we get any say in how these funds are appropriated? No.
September 30, 2008
1:09AM | #
no matter who you bail out, you are rewarding people for making bad decisions. Now, not all people losing their homes made bad choices, but then again, not all the banks made bad decisions either. But as a whole, its a situation only made real due to greed on both sides -- and those who should have been watching out for us, failed to do their job.
As TJ points out, we will be the ones paying for this, and we should be the ones to benefit if any profit is to come from it - regardless if the money goes to the banks or the people. However, if the money does go to the banks, there is a chance for a quicker return.
All I know is that I didn't make the bad decisions, but I know I'll be paying for it -- one way or the other.
September 30, 2008
8:57AM | #
@PaulH: what do you mean with your reference to Ben Stein being expelled, and why should we think it affects his opinion?
November 9, 2008
3:37PM | #
I'm an Aussie and find this post very interesting becuase in Oz the Government is doing something a bit like this $700 bailout idea. It's not a home-owner bailout but it is a $1,000 payout to all senior citizens on pensions to ease financial hardship and stimulate spending. I think the micro-intervention has a lot going for it as handouts to institutions can easily mean they 'get away with murder' and keep doing the wrong things that got them into trouble in the first place.
Someone I heard lately said something that caught my ear: "the industrial and financial sectors are happy to privatize their profits but even happier to socialize their debts". The big bailout approach seems to me to lean this way, illustrated especially by those recently rescued organisations whose executives were exposed continuing to revel in extravagent perks and personal indulgences at 'company' (i.e. taxpayer) expense.