I know how decent and honest Communists must have felt with the Stalin showtrials and the Soviet invasions of Hungary and Czechoslavika.
In those cases, such Communists must have just felt so let down. You spend your time believing in something - say socialism and a classless society - and some crisis or emergency comes along and every principle is discarded.
Like many Tories and economic liberals, I have defended the principle of wealth in the city (rather than sex in the city, though I have so many frustrating near-misses for both). After all, those who take risks should be rewarded. And also, one cannot buck the market or deny economic changes.
And then last week happened. The investment banks and the retail banks got it wrong. And so they suffer the downside to the rewards and profits they (according to usual old arguments) they deserved.
This is a proposed state bail out on the most drastic scale. A state intervention refused to mining communities and Midlands car factories. The bail out may well be necessary so as to prevent a greater collapse. There might, as one could say, be a greater good.
Be that as it may: these are extremely disconcerting times for any of those both reflective and right-of-centre.
Friday, 26 September 2008
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2 comments:
A very thoughtful and thought-provoking take on the situation, if I may say so. Well said, Jack!
Most Americans are deeply opposed to this bailout. But it seems like
congress is going to do it anyway, "to save us".
If we taxpayers are going to be paying the bill, shouldn't we see some
benefit from it too?
If they are going to spend the money, shouldn't they spend it in the way
that helps the most people?
What $700 billion to $1 trillion could do:
Instead of giving the money directly to the banks, the gov could send checks
for $14,000 - $20,000 to every single owner occupied home in America with a
mortgage. These
checks could be made out directly to the mortgage companies. So people could
not use it to go out and buy a car or a mink coat. The checks could only be
used to pay down an existing mortgage.
The banks would be getting the full $700 billion to $1 trillion that they
want. But it would pass through our hands first. They are spending our money
on the bailout. At least let us touch it for a few seconds.
This would:
1. Rescue the banks from themselves. (they still get bailed out)
2. Rescue private investors of mortgage securities. (they still get bailed
out)
3. Give people who are 30 - 90 days late a reprieve. They will be caught up,
and gain equity. $20,000 is more than a year of payments for most people.
(this is a bonus benefit, at no additional cost)
4. Builds equity for those who are not behind, by paying down their mortgage
by $20,000. (this is a bonus benefit, at no additional cost)
5. Removes negative equity for many home owners. People who owe $200,000 on
their $180,000 homes would now be able to sell them for the $180,000 value,
without going bankrupt. (this is a bonus benefit, at no additional cost)
6. Provide a soft deflation of home prices, rather than a crash in prices.
(this is a bonus benefit, at no additional cost)
7. Grease the economy. Those who are not behind on their mortgages and
already have equity built-up in their homes, will have even more equity.
These people will be flush with cash and will spend it on cars, washers,
dryers, etc. (this is a bonus benefit, at no additional cost)
8. Expose the mortgage brokers and banks who issued fraudulent loans. If 60%
of the "customers" of a broker or bank "don't send their checks in", they
can be looked at for fraud. Then they can be put in jail. (this is a bonus
benefit, at no additional cost).
We would all get a giant do over, instead of just the banks. We are the ones
paying for it anyway. Why should we pay the full cost of our mortgages, and
pay for the bad ones too?
Any banks that can not make it after this massive inflow of cash, they
deserve to fail.
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