THE BAILOUT
I don't claim to have any particular expertise on this, but I think that the poplist outrage towards the proposed plan is misplaced. There's a real emergency at hand right now, an imminent threat that if not properly handled could result in a truly miserable state of affairs, affecting all Americans. The proposed plan may not work, or be the best possible, but some of the rhetoric I've seen is wrongheaded.
My understanding is that the interbank lending which allows our financial system to function is simply not happening - because no one wants to lend to an insolvent bank, and it's impossible to tell who is and isn't insolvent because these huge assets (the mortgage-backed securities, primarily) held by the banks are impossible to value. Are they worth 50% of face value? 5%? This new agency sets a minimum price for the assets, and then we can sort out who is actually insolvent using that price.
Two responses to the objections: 1) The assets the government would buy aren't valueless, just difficult to value -- and some of them may end up being worth equal or more than the government pays for them. The government isn't throwing this $700 bn out the window (though it may net a loss). 2) If a man sets his own house on fire for the insurance money, we still call the fire department. Later, we put him in jail. We're calling the fire department right now.
posted by Carlton at 11:16 PM 