"We are not on the verge of a new depression. The housing bubble collapse in California, Florida and a few other states is not enough to bring down the entire banking system. Investors who made mistakes in these markets should be held responsible and those who navigated the Fed-distorted market should be rewarded for their wisdom and prudence. Enacting the Paulson plan will not allow that to happen and our economy will suffer for it in the long run. The Japanese tried to prop up failed banks in the aftermath of the bursting of their twin bubbles and the result was 15 years of stagnation. Why are we emulating a strategy that is a demonstrable failure? A better alternative would be to allow capitalism to work as it should and stop the interventions of the Fed in the money market. Trust capitalism. It works." Joseph Calhoun
Amen. The Wall Streeters like Paulson, the professors like Bernanke, and the true politicians like Pelosi have now managed to herd us toward a future in which government runs the private sector through "interventions" of the kind described in this article.
The members of the House of Representatives who have resisted this process of consolidation of the government and the plutocracy into one thing should be rewarded for their action. Let us hope that a lot of them vote against the TARP.
Calhoun is right. The markets will sort this mess out if given a chance to do so. They are in the process of doing it now. The TARP is the product of the desire of the wealthy to protect their equity in companies that have failed. To some extent the failure was caused by a misguided government policy of "guiding" banks to a policy of making foolish loans to people who had a low probability of success in re-paying them. Cleverness and greed then played a large role in devising elaborate and fantastical schemes for securitizing "empty" loans, loan futures, and "slices" of loans into tradable junk.
Finance is a truly Darwinian "arena." If it is not, then it is merely another government department. Is TARP a step on the path that leads to a planned economy? pl
PS Oil is at 101.15/bbl as I write.