While I've been following the recent economic news with my usual mixture of glee and despair, I've also had one thought rattling around in my head just about non-stop the last few days, and it's time to get it out:
When the government buys* and owns things like AIG, it's textbook socialism. When the government announces an even bigger plan (and the AIG buyout cost taxpayers something like $85 billion!) to buy a lot of these failing assets, it's socialist to the core.
I hope the irony of that, and of how hard Republicans and so-called free market supporters are cheering for it, is not lost on anyone.
Also, see this point from Kevin Drum:...I will, of course, note for the record that if Uncle Sam can afford to spend a trillion bucks or so rescuing Wall Street, it would be nice if they could spend a trillion bucks shoring up all the poor saps losing their homes because they can't make the payments on those option ARMs they were talked into buying during the boom years. We could do it if we wanted to, and the risk wouldn't even be appreciably different from the Wall Street bailout.
Fifty bucks says anyone who brings this up on cable TV gets shouted down and called a Commie, the massive corporate bailout underway not withstanding. This is America, dammit. No one** gets a free ride!
UPDATE: This is also, in a way, the continuation of one way of reading neoliberalism: The privatization of profit and the publicization of risk. Only in this case, it's being done in the open - the risk is being publicized (that is, the bill is being footed by taxpayers) after things went bad. In that sense, it's a big FUCK YOU from political and economic elites to everyone else. We're all going to get our own piece of Big Shitpile©, and there's really nothing we can do about it.
*Obligatory disclaimer: For the purposes of this post, I am agnostic on whether or not the buyouts are a good thing. However, we should at least acknowledge that the so-called free-market capitalism touted for decades by the Republican Party would simply let all these companies fail. The fact that Bush, Paulson, Chris Cox and Ben Bernanke are diving in with both feet means that they don't believe the ideology they push, or are really, really dumb. I'm not ruling out the possibility of both being true.
**Unless you're under 12 years of age or worth more than, say, $500 million.
Friday, September 19, 2008
Can't. Stop. Laughing.
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3 comments:
Actually, that was done also. When the government took over freddie and fannie, they are taking on those faulty or other such mortgages. As a government agency, they can hold on to those mortgages indefinitly. A bank would have to sell them to recoup money for the outstanding loans. As the banks unload millions of properties at the same time, and no one is buying, the prices collapse. Since the government can hold those loans, the prices are less likely to collapse. As the price recover over the next few years, the government can start releasing the homes out into the market and recover the money.
The bailout of AIG can do the same thing, but with insurance added to the mix. They control the company, but also set insurance rates and regulations. They can stack the deck to win. The investment has already doubled in the last couple days.
When the government assisted with the LTCM bailout in 1988, those companies were buying the positions at rock bottom prices. Over the next few years, they made a killing. Most of these bailouts, while in theory put the taxpayer at risk, it would be unlikely to happen.
Apparently my new political comments policy needs to be expanded to economics... and banning talking points.
re: the claim that this will somehow make the government money, or that this is a temporary thing, I have seen no evidence that this is true. As economist Duncan Black has pointed out, these are fundamentally bad loans. Waiting a few years isn't necessarily going to solve anything.
And, as Digby has pointed out, this is the same group of folks who claimed the Iraq war would pay for itself.
McCain? Reform Wall Street? What... aw, fuck it. Comment deleted.
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