Adopt an Investment Bank

 Posted by on 29 September 2008 at 1:43 pm  Finance, Politics
Sep 292008

Via Bill, a funny column on the bailout from Joel Stein in the LA Times:

Even though I understand so little about economics that much of my long-term investments are tied up in Costco products, I feel pretty sure that letting Congress give Treasury Secretary Henry Paulson $700 billion to buy super-crappy mortgages is not the right call.

Sure, like any American, when I see a photo on the Internet of an adorable little investment bank and find out it’s at risk of being put to sleep, I want to throw in $2,000 to $3,000 of my own money to adopt it. But instead of jacking up inflation, letting the dollar sink further and paying higher taxes so we can keep up cheap borrowing — which is what this plan amounts to — I think we need to let those who made bad loans get burned. We need to accept that credit will dry up and that maybe — for just a bit — we’ll have to stop buying more than we can afford.


So let’s not stop the short-selling of financial stocks — the only brake on overindulgence — as Paulson did last week. Let’s not strip Congress of yet another power by giving the Treasury secretary the right to decide where to dole out a large portion of our budget. Let’s not encourage more risky loans by making profits private and losses public. And let’s not create some bastardized form of communism in which the new rule is, “From each according to his ability, to each according to the size of the investment bank he owns shares in.”

I don’t agree with the whole column. He fails to recognize government regulation as the root problem of the current crisis, instead claiming that “we’ve got basically sound banking system that got a little under-regulated during the Clinton administration.” However, I do appreciate his insistence that the people and corporations who took the risks assume the responsibility for their losses. And I liked his humor: it highlighted the absurdity of treating corporations as objects of government charity.

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