[Marxism] Campaign for a NO on bailout?

[bauerly@xxxxxxxx]

I did find this by Krugman after writing that.  Now I am agreeing with Krugman. 
Crises make strange bedfellows.

Brad

http://krugman.blogs.nytimes.com/2008/09/20/no-deal/

September 20, 2008,  4:46 pm
No deal
I hate to say this, but looking at the plan as leaked, I have to say no deal.
Not unless Treasury explains, very clearly, why this is supposed to work, other
than through having taxpayers pay premium prices for lousy assets.
As I posted earlier today, it seems all too likely that a ?fair price? for
mortgage-related assets will still leave much of the financial sector in
trouble. And there?s nothing at all in the draft that says what happens next;
although I do notice that there?s nothing in the plan requiring Treasury to pay
a fair market price. So is the plan to pay premium prices to the most troubled
institutions? Or is the hope that restoring liquidity will magically make the
problem go away?
Here?s the thing: historically, financial system rescues have involved seizing
the troubled institutions and guaranteeing their debts; only after that did the
government try to repackage and sell their assets. The feds took over S&Ls
first, protecting their depositors, then transferred their bad assets to the
RTC. The Swedes took over troubled banks, again protecting their depositors,
before transferring their assets to their equivalent institutions.
The Treasury plan, by contrast, looks like an attempt to restore confidence in
the financial system ? that is, convince creditors of troubled institutions
that everything?s OK ? simply by buying assets off these institutions. This
will only work if the prices Treasury pays are much higher than current market
prices; that, in turn, can only be true either if this is mainly a liquidity
problem ? which seems doubtful ? or if Treasury is going to be paying a huge
premium, in effect throwing taxpayers? money at the financial world.
And there?s no quid pro quo here ? nothing that gives taxpayers a stake in the
upside, nothing that ensures that the money is used to stabilize the system
rather than reward the undeserving.
I hope I?m wrong about this. But let me say it again: Treasury needs to explain
why this is supposed to work ? not try to panic Congress into giving it a blank
check. Otherwise, no deal.


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