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Bankrupt Bailout > Letters

Web Letter

As a new subscriber to The Nation, I waited with enthusiasm for my first print addition to arrive in the mailbox. I was disheartened, however, to read this editorial. Really, you were simply dying to be rid of the Bush administration, and now that the White House has been properly deloused, you pull a Limbaugh on Obama. Give the man a chance! There may come a time when the FDIC has to take over the banks, but it is more wise to start off small. Remember, many people cannot see the bigger picture. If the banks were nationalized tomorrow, the US would go into culture shock. If you have an illness that could be effectively treated with medicine, would you try it, or jump ahead to surgery where the risks could kill you? Give Mr. Obama some breathing room, or run the race yourself in 2012.

Julie Kelly

Portland, OR

Feb 25 2009 - 1:17am

Web Letter

On this issue, The Nation's editors and the intellectual descendants of Milton Friedman wholeheatedly agree: taxpayers should not be bailing out failed banks. The big, obviously insolvent banks should be turned over to the FDIC, and the stockholders and bondholders will have to eat their losses.

Anna Schwartz, Friedman's co-author, made this point back in October. In a Wall Street Journal interview where she opposed the Paulson bailout, she said: "They should not be recapitalizing firms that should be shut down."

John Cochrane, Luigi Zingales and Anil Kashyap, all of the University of Chicago, have made this point in varying ways. And some of my colleagues at George Mason's Mercatus Center, including Alex Tabarrok and Arnold Kling, have pushed for just doing "the normal thing": bankruptcy.

Deposit insurance protects the weakest, so bank bondholders and stockholders can take a lot of losses without setting off waves of financial instability.

This is a great opportunity for left and right to work together to make sure that losses are privatized, not socialized.

Garett Jones

Washington, DC

Feb 19 2009 - 2:44am

Web Letter

Sounds good! I would rather have the money given to traditional commercial savings banks. It would get into the Main Street economy sooner.

Pervis James Casey

Riverside, CA

Feb 17 2009 - 4:02pm

Web Letter

Even The Nation accepts the obfuscations being peddled these days about "the financial system." Why not calling things by their name?

The only sure consequence of letting the "financial system" go bankrupt is that the trillionaires of the country (and of the world) would lose humongous amounts of money (but they wouldn't be reduced to misery, far from it; yes, smaller investors who chose "risk" would also go down in flames and they would deserve it, even if not as much).

It would be a revolution driven by the market's "invisible hand"--if you want to use that image to refer to the process by which the greedy neo-feudal class of trillionaire masters of the universe self-destroyed by bribing economists, journalists and politicians in order to force-feed a "new American consensus" of deregulatory nonsense to the Western world and so make tons of short-term money that later evaporated as the hot fluff it always was.

"Saving the financial system" is the catchy phrase invented by bribed economists, journalists and politicians to save this neo-feudal class of trillionaires that is sooo "essential" to what "America stands for" and to what "we would like to be," as the "radical" Paul Krugman has repeatedly put it, i.e., essential for the bribes paid to economists, journalists and politicians and for the protection of the trillionaires' right to socialize their losses and to shelter their profits from taxation by invoking in shrewd alternation (i) the "sanctity of private property" (unless this property belongs to easily taxable suckers who are too uncouth to bribe economists, journalists and politicians effectively) and (ii) the "universally accepted axiom" that one should not interfere with the "workings of the market" (unless the workings "work" against those who can pay effective bribes and have paid them for many decades to great acclaim; note that many bribed economists, journalists and politicians do develop a sense of loyalty towards their masters, in the way that many house negroes did towards their masters in Ol' Glorious Dixie).

So it's time to let the neo-feudal class of trillionaire masters of the universe fail and to save through nationalization the non-speculative parts of the banking system so the expertise to finance worthy private projects is kept intact and given new prominence. (As you may remember, in the Middle Ages whenever the feudal class created a mess they "rescued themselves" for the "sake of the country" by taxing the hell out of the serfs and the bourgeois, but now with "the triumph of liberty" all of that has changed... yeah, right!)

That way the trillions about to be taxed away from ordinary citizens and given to trillionaire masters of the universe can be used instead to finance public works that will raise the standard of living for everybody and to foster private entrepreneurship that focuses on real production rather than on "innovative" financial vaporware.

Marc Dunord

Chicago, IL

Feb 17 2009 - 11:30am

Web Letter

Your prescription for the big banks is clear and sensible. I take slight issue with your characterization that Geithner's announcement recalls the capital infusions for bank shares (no doubt overvalued) that transpired at the end of the Bush Administration. Rather, Geithner's plan is the same that Paulson first advocated at the onset of the crisis, but was abandoned, seemingly because of foreign objections.

Simply, the revived plan is to purchase the derivative securities the likes of Paulson sold to the world when he was private, and Geithner ignored as a member of the Fed. These are the "toxic debt" instruments that are, well, toxic. Geithner cannot speak clearly on the subject because plain talk would excite closer examination. He talks about the "secondary credit markets" being clogged, which are the derivatives trading venues. This is the bailout of Wall Street finance such as Goldman Sachs, and the large money banks such as Bank of America. It is politically incumbent on him to be vague about the supposed lack of current ability to lend. How else can he sell the buyout of automobile loan derivatives to a public inundated with television ads proving automobile purchase financing is readily available?

The Obama Administration is dead set on subsidizing the taxpayer financing of big finance's derivative gambling. There will be no substantial reforms of the derivative markets.

Jay Markel

Orange, CA

Feb 16 2009 - 11:19pm

Web Letter

I note that, in your suggestion as to the best solution to this crisis, you proceed from a false assumption; namely, that government is just as honest as Wall Street and not as capable of creating a Mongolian clusterf___ of things as Wall Street is.

And when they do screw it up themselves, who bails the government out?

No, gentlemen (and ladies), I do not presume to know whether President Obama's plan will work, but a relinquishing of economic freedom into the claws of Government on a large scale is a definite formula for failure.

charles h. thornton

Reisterstown, MD

Feb 16 2009 - 10:04am

Web Letter

"Let us hope President Obama has asked his economic advisers if they have a Plan B--because Plan A failed as soon as Treasury Secretary Tim Geithner announced the details." Kudos! A place where the propaganda and intimidation have no power.

Carl W. Lemieux

Publicadvocate.com<br />Portland, OR

Feb 16 2009 - 1:04am

Web Letter

Thanks so much for this excellent editorial, which expresses some badly needed skepticism regarding the very unfortunate direction our administration has taken. I voted for Obama and badly want him to succeed, but he will need to summon up a considerable amount of courage to face down the oligarchs.

I agree that the banks and other failing institutions need to be nationalized. But your editorial reflects only one, relatively small, part of the problem. If the banks are allowed to go bankrupt, then trillions of dollars in "toxic assets" will go up in smoke, effectively destroying the international financial system.

There is, as I see it, no way to both prop up this system and maintain the monetary system. In fact, both are probably doomed. The real question is: how do we minimize the "collateral damage" to billions of innocent people all over the world, that could result? I believe I have some answers, which I've posted on a blog, and I invite your readers to take a look, and comment. Thank you.

Victor Grauer

Pittsburgh, PA

Feb 15 2009 - 3:37pm

Web Letter

In a recent article in Der Spiegel, Stefan Homburg argues that Lehman Brothers is a good model for those who truly believe in a market economy. Let the banks go bankrupt and let the banks from the CEO neocon executives down to the stockholders feel the pinch. That is what a market economy is really all about. Maybe Milton Freedman and Thatcher/Reaganomics would not seem so palatable when the super-rich have to deal with the breaks of being downsized, fired, and on the street. Let crisis capitalism, as Naomi Klein so aptly defines it, be applied to the bankers and the senators who are so ready to bail them out for fear of losing their lobbyist perks. The Obama cabinet will lose more than Daschle. Hillary Clinton's bread is buttered by agribusiness, which also needs to feel the loss of big subsidies.

gary thomson

Montreal, Quebec, CANADA

Feb 14 2009 - 8:42pm

Web Letter

The problem with The Nation is that the contributors make way too much sense for the knee-jerk, sound-bite, bumper-sticker sloganeering propaganda that passes for mainstream news.

This article is right on the money (pardon the pun). The most radical solution can be found on www.themoneymasters.com, with the blessings of Milton Friedman: i.e., get rid of the central bank and go back to the Constitution, which empowers the Congress alone to mint coin (make money.)

A more pragmatic approach complementing this article is for FDIC intervention. Break up the megabanks, throw the executives out in the street with not so much as a by-your-leave, and find new officers and private equity.

All it takes for either approach is honest politicians with balls. Good luck!

Dennis St. John

Big Timber, MT

Feb 14 2009 - 6:51pm

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