In the past few weeks the US government has taken over some of the worlds largest companies. These companies should have been shining examples of what a free un-regulated market can accomplish, instead they have become examples of short term greed winning out over long-term viability, and the government has had to step in to save them.
Much like an eighteen-year-old. College student who needs their parents to wire a few thousand to pay-off their gambling debts, these companies thought they knew what they were doing and they got spanked.
I doubt the teenagers will learn from this but, hopefully their parents will hide the credit cards from them in the future.
UPDATE:
It looks like the bailout is little more than the government buying all the bad debts of a few corporations. While this will help poorly managed companies to stay afloat it will do little to end the crisis.
In some ways it is starting to seem like the main difference between the rich and everyone else is that they are more willing to steal than the rest of us.
I’m worried.
It’s the end of paying for things with credit for the time being. Printing up $700b to (not-recapitalize or acquire) firms needing to unload illiquid debt instruments that mature in 30 years or more. Already a write-down at this point, it’s hard to imagine that a firm’s willingness to lend would be so effected by whether or not they sold out some of their worst paper at a fire-sale price over to the government. Whether that privilege came with tar and feathers or not doesn’t really matter, as long as it seems like it might have been the right move until November…
It’s stupid for another reason, since the liquidity (that hasn’t gone away throughout all this…FED window) provided through the transactions will not directly lead to more money being lent, then the economic impact is muted. Those dollars don’t zip through hands all over the place over time, but are most likely to be dropped within the financial sector somewhere.
Dropping more money into that realm as opposed to the real economy…where is the disconnect here?
Ironic though, that the last big pitch of this downward trending paradigm is made by an investment banker who also happens to be in charge of the Treasury Department.
It is ironic. The fox is guarding the hen house.
I wonder how much of this bailout plan is to assuage foreign investors and foreign central banks who may have especially hard feelings about being burned so badly by the U.S. financial markets?
At least it seems like congress is not falling for the sky is falling therefore we must do something even stupider argument of the Bush administration.