a midway bikelog

Lots of interesting developments on the idea of financial bailouts this week, with our economy tanking and the executive branch making a power grab. We need to keep banks solvent, but the companies and their executives who screwed up should suffer the brunt of the pain. There’s also a real conflict of interest issue as the government hires people from these failed firms to clean up the mess they themselves created. It’s not just a matter of getting thin concessions to get a bill passed, it’s a serious question of balance of power in the government that should not be committed to in a week.

A couple of good reference articles:

Sen. Bernie Sanders, Robert Scheer and Dean Baker on the Proposed $700 Billion Bailout of Wall Street, the Largest Government Bailout of Private Industry in US History

DEAN BAKER: Absolutely, and this speaks to the nature of the bailout. The bailout should not be fun, if it’s constructed right. … But the bailout has to be punitive, if it’s serious. It shouldn’t be a field day. We shouldn’t have people lining up to get in.

ROBERT SCHEER: …you know, there is a model for this, and Mussolini had it in Italy, and it’s called “fascism.” It’s where your big corporate interests throw in with government, destroy the freedom of the rest of the people, and preserve their power. Everybody forgets, private corporations and banks did quite well, made out quite well in Italy and Germany in those days, you know?

SEN. BERNIE SANDERS: For years now, they’ve told us that we can’t afford—that the government providing healthcare to all people is just unimaginable; it can’t be done. We don’t have the money to rebuild our infrastructure. We don’t have the money to wipe out poverty. We can’t do it. But all of a sudden, yeah, we do have $700 billion for a bailout of Wall Street.

The Swedish banking crisis response – a model for the future?

One way of limiting moral hazard problems was to engage in tough negotiations with the banks that needed support and to enforce the principle that losses were to be covered in the first place with the capital provided by shareholders.

This whole idea of the trading of mortgages, as a regular non-financial analyst person, strikes me as a house of cards built purely for the purpose of having another outlet for market traders to skim money from the economy. It seems like there are layers of market trading in all kinds of sectors where the only purpose is to move money around in an Office Space-like scheme to grab the fractional pennies.

I’m starting to question the whole investment structure. My 401(k) is starting to feel like Social Security; i’m going to have to assume that neither will be there for me when/if i retire. It begs the question of why i’m continuing to put money into the house of cards.