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when the music stops .....
The scandal is not that government is acting.
The scandal is that government is not acting forcefully enough - using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets.
Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system.
The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times.
There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.
A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system.
Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own - cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess.
If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.- By John Richardson at 21 Sep 2008 - 8:14pm
- John Richardson's blog
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what's not to like .....
from Crikey …..
Jeff Sparrow, editor of Overland writes:
If you’re Richard Fuld, the chairman of Lehman Brothers, what’s not to like?
You get to keep your Greenwich mansion, your Park Avenue co-op, your estate on Jupiter Island and the $40 million you earned in the last year alone.
Not only do you face no penalties or recriminations, the government whisks away all the losses for which you and your pals are responsible, and dumps them squarely on the laps of everyone else.
The Calculated Risk blog puts it like this:Unless there is a dramatic change, there will be no upside participation in the financial companies for taxpayers, and the taxpayers will recapitalize the banks by, in Krugman's words, ‘having taxpayers pay premium prices for lousy assets’.
We’re talking, in other words, about a huge transfer of the liabilities from some of the world’s richest people to ordinary American workers, who will be handed something like a $20,000 debt each.
Despite the Chronicle, this is not a nationalisation in any traditional sense, since the population doesn’t actually receive anything for their money. Rather than becoming more transparent, the financial sector seems about to become less so.
As Newsweek says, "The prospect of unelected officials putting massive amounts of taxpayer resources to work without transparency or approval from Congress, and without a clear process at work, is indeed troubling."