Tuesday, September 30, 2008

Who will be protected by a Bailout?

Reporters are running out of words to describe the drop in stock prices yesterday after the US House of Representatives voted down the $700 billion bailout of the financial system: crash, plunge, carnage, bloodbath. Supporters of the plan said that the bailout is necessary to prevent further financial collapse. Others fear that even $700 billion would not be enough.

What is usually left unstated in these discussions is what will happen if government doesn’t act. This part is usually left to our imaginations. In a more fearful moment, I tend to recall images I’ve seen of the homeless and hungry in the swirling dust of the great depression. Maybe others imagine burning buildings and widespread panic.

The truth is that supporters of a bailout probably get more mileage out of leaving the consequences unsaid. We imagine much worse outcomes than most commentators would predict.

I have little doubt that the US government will ultimately have to do something fairly costly to limit the damage, but it sickens me to think that public money may be used to protect the jobs of executives at financial institutions whose greed is largely responsible for the current mess.

If there was a plan designed to protect the economy, but not protect the businesses and individuals most responsible for the current crisis, this plan would likely get strong public support.

No comments:

Post a Comment