Monday, September 29, 2008

The Bailout: A no brainer, better than nothing or a bad deal?

The Politico's Arena contains responses to the weekend's news about the bailout package. I really couldn't care less about what the lawyers and politicos think, but they do have some people worth listening to:

Professor and Former Treasury Official Gary Clyde Hufbauer:
The vote in favor should be a no-brainer. The Congressional rank and file can choose this bill or a great big crash. But the national financial cleanup has just started. Come April 2009, this week's rescue bill will be seen as the end of the beginning

Columbia University Banking Professor Charles Calomiris:
The bill is better than nothing, so I would vote yea, but it is a close call. The right approach, which the vast majority of economists who have studied such matters supported, was preferred stock injections into financial firms. This was rejected without a hearing by Congress, and the scandal in this process was the complete absence of independent testimony.
Center for Economic Policy Research Co-Director Dean Baker:
The bailout is a classic case of Washington herd mentality in which all right-thinking people know that they are supposed to support the bailout, but none of them really knows why.

We have been given several different rationales for the bailout, including the claim that it is needed to prevent the collapse of the system of payments; that it is necessary to prevent a Great Depression; and it is a form of anti-recession stimulus.

None of these claims is true...This deal taxes middle income people to support incompetent Wall Street bankers. That’s a bad deal.

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