i thought i had better add this so that we don't go off on the wrong
track. the "saddle the taxpayers" was a rhetorical statement; there are
many things wrong with the way the s&l crisis was handled thru the rtc,
and there were real costs to our economy. but in an important sense,
government spending is govt spending. rtc spending added to the deficit
and helped to pump up the economy; spending on interest to service rtc
bonds adds to govt spending in the future. so the rtc spending and
interest spending is not a "burden" on the taxpayers; it is just like any
other deficit spending. some proposals have advocated taxing the
population to bail-out the japanese banks; this would be a real burden and
would worsen the recession because it is unlikely that the spending to
bail out the banks would offset the already strong deflationary forces
that would be worsened by additional tax burdens. (the balanced budget
multiplier might be less than one due to effects on expectations?)
i should also say that i think that what Michael is getting at is that
this is a balance sheet problem that can be changed by changing accounting
rules. as paul d. always says, acct'g rules are a human convention. an
rfc-type bailout essentially does that: govt gets to count its equity
injection as a purchase of a financial asset expected to earn returns. in
the case of the rfc, that is exactly what happened.
L. Randall Wray
Senior Scholar
Jerome Levy Economics Institute
Bard College
Annandale on Hudson, NY 12504
email: wray@xxxxxxxx
fax 914-7581149
phone 914-758-7730