Time Not for a Bailout, But for Nationalization...

John McCain and the House Republicans have blown up the Paulson-Dodd-Frank compromise--for that's what House Republican Whip Roy Blunt says that John McCain did:

Roy Blunt: Everybody else seemed to be rushing for a deal and John McCain came back and said, ‘Wait a minute, I think the House Republicans have the taxpayers in mind and I’m with them’...

Now it's time to go back to three principles. There are three options:

• Do nothing.
• Bailout (a la Paulson)
• Nationalization (a la Sweden 1992)

Do nothing was last tried in 1929-1932. The result was called the Great Depression. Let's not do that again. Let's decide between bailout and nationalization.

Nationalization has the best chance of avoiding large losses and possibly even making money for the taxpayer. And it is the best way to deal with the moral hazard problem.

It might work like this. Congress:

• grants the Federal Reserve Board the power to take any financial firm whatsoever with liabilities and capital of more than $25 billion that is not well capitalized into conservatorship
• requires the Federal Reserve Board to liquidate any financial firm in its conservatorship when it judges that the firm is insolvent (paying off in full or not paying off in full the liabilities of the firm at its discretion), unless
• the Federal Reserve Board finds that preservation as a going concern is in the interest of the taxpayer, in which case Congress
• grants the Federal Reserve Board the power to transform equity stakes in the firm into junior preferred stock at par value and then transfer ownership and custody of the firm to the Treasury
• requires the Federal Reserve to terminate conservatorship if the firm becomes well-capitalized once again.

In addition, Congress:

• grants the Treasury the power to issue up to $500 billion of troubled asset redemption bonds, the proceeds of which are then to be loaned to the Federal Reserve to be used to cover the liabilities of those liquidated firms that the Federal Reserve judges it is in the interest of the taxpayer to have their liabilities paid off in full.

Paulson had his shot. It's time for the Democrats to pass a nationalization in the taxpayers' interest bill and dare Bush to veto it. If he does, then announce that the congress will pass it again the day after the election. And if he vetoes it again, announce that congress will pass it yet again on January 21, 2009.

Comments

[Measure for Measure]

Cram-down for debt-holders is a fourth option. Luigi Zingales of the University of Chicago made the case for it in his open letter "Why Paulson is Wrong".
http://www.voxeu.org/index.php?q=node/1670

Essentially, it's an expedited Chapter 11 proceeding, where a third party wipes out the shareholders, administers a haircut to the bondholders unilaterally, then converts a share of the bonds into equity. The difference here is that the private parties don't get to negotiate the terms over several years.

The plan would involve little taxpayer money, but I frankly don't know how plausible it is.

[Neil B]

Nationalization sounds cool especially as revenge for what the fat cat sector did, but it has to be well-managed and transparent or the outcome is not pretty. Also, it seems at least like there are more than those three, simple options - like "insurance" etc. Well?

PS: Clearly Blunt and some Republicans are willing to put the nation's economy in jeopardy to help John McCain win this election. That's a disgrace, not heroics.

[baileyman]

Yes!

And double Yes! to expedited bankruptcy.

[mpowell]

Expedited bankruptcy sounds like the best option to me. Lowest risk in terms of corruption/mismanagment. Lowest cost to the taxpayer. Hardest approach to f#ck up.

[Colin Danby]

One of Yglesias' commenters calls this the transitional phase of Republican communism. Who knew?

[bigTom]

WTF. Aren't we in a crisis situation where you gotta go with the treasury officials that you have, not the ones you wish you had. Now, no one is happy with the plan -even in its modified form (thanks to all whose efforts forced those modifications), but it looks like every one and his brother is inventing their own plan. I don't think we have time for a long debate about the best plan. Don't we only have time to tinker with the plan that has been proposed, and then all get behind it? I though Brad had bought into that idea?

[albrt]

I think we have time. What's the downside? Four months without Wall Street lenders primarily means four months with no bogus Ponzi securities being sold to our pension funds. The Paulson bailout was not focused on institutions that do primary lending to actual productive enterprises.

Although - the Paulson bailout might have had the effect of keeping some classes of widely held bogus ponzi securities afloat for a while, thus allowing some primary lending institutions, pension funds, etc. to appear solvent in the short run.

[El Cid]

The problem with this suggestion is that it doesn't result in a massive give-away of taxpayer dollars, to the tune of hundreds of billions, maybe even trillions, of dollars, directly to the Wall Street super-rich.

Which I think is now the goal here, and the hoped-for economic damage control a pleasant side-effect.

[TingumbobEsq]

Yes to bankruptcy reorganization, but the issue is how to undo not just the real estate bubble. The speculative frenzy has gripped the world since the floating exchange rate currency debacle when Nixon took the dollar off the gold reserve. (And I said reserve not standard.) There has been one bubble after another, all driven by lunatic monetarism. (I.e. the belief that there is inherent value in money.) What we require as a solution is what FDR accomplished in getting us out of the last crash and depression. And that is a system of measures to restore the physical economy of our nation, a stable currency and treaty arrangements with the great powers to foster cooperation along these lines. This was what Bretton Woods did.

[jhh]

Wow. This is a real shocker. Says a lot about where we are. I have lived in Australia and France as they privatized their telecom industry, a long and winding road. Can we have some discussion about what nationalization actually does, and how we eventually unwind it? (if we unwind it).

[druce]

following your breakdown of crisis - there are three levels

- the panic - slapping the markets in the face so they start working again - and people know the world will not end, any further shoes that drop will be dealt with in a reasonably predictable matter

- recapitalizing the banks

- structural reforms so you don't have systemic risk in markets like CDS, large corrupt players taking advantage of implicit guarantees and backstops without necessary oversight

nationalization addresses #2. but I wonder if the outcome isn't that private capital is driven out as no one buys stock if the government might nationalize, and eventually you have to take over the entire system. Of course at that point it speeds up the process of resuming lending, since you can just order the banks to jump-start lending. On the upside you have a great one-stop financial supermarket and can transfer funds from your government-owned bank account to government-owned insurance, mortgage etc. But some might argue that we're not Sweden and don't really want to be.

John Paulson in the WSJ and Soros in the FT have the more moderate equity infusion solution. I am more partial to that than Hank's solution of buying crappy assets wholesale, or nationalization. But I suspect a la 1933 only extreme measures and very strong leadership will get the panic to stop.

[Greg]

Hi, Brad. Could you expand on the first, "Do Nothing" option a bit more?

In particular, what do you think about the idea of using $700B to mitigate the impact of a severe recession rather than using $700B to do a bailout that attempts to reduce the likelihood of a severe recession?

For $700B, we could do massive fiscal stimulus. For example, we could create a massive infrastructure building program, fixing our aging roads, bridges, and schools and investing in our future, all while creating millions of lower and middle class construction jobs.

The core question here is, is a bailout the best use of $700B? Or, in this time of economic crisis, are there other uses of $700B that would be better?

[lambert strether]

The Paulson Plan is a "bust out," not a bailout:

Davey Scatino: You told me not to get in the game. Why’d you let me do it?

Tony Soprano: Well, I knew you had this business here, Davey. It’s my nature. The frog and the scorpion, you know? Besides, if you would’ve won I’d be the one crying the blues, right?

Davey Scatino: What’s the end?

Tony Soprano: The end… It’s planned bankruptcy. Hey, you’re not the first guy to get busted out. This is how a guy like me makes his living. This is my bread and butter. When this is over you’re free to go. You can go anywhere you want.

http://www.correntewire.com/bust_out_the_republican_approach_to_governance

[Dean Baker]

I'm with the DeLong plan!!!!!!

[janis]

There is little doubt that straightforward nationalization...is the most cost effective and fair manner by which to proceed. However, both parties in Congress are unlikely to sign on to this because of vested political interests.. In other words, the Democrats are not willing to move the current discussion to its logical conclusion. This, despite the available evidence from Sweden (which is readily available) on how it could work. I hope someone shows the Democrats your proposal...

[John Merryman]

Ellen brown is an author with a track record at proposing something similar;

http://webofdebt.wordpress.com/monetary-proposal/

I would add to this that while the currency should be national, the banking system should be incorporated at all levels of government, with small banks at the county and town level, medium ones at the state and city level and a few national banks. Their income would fund infrastructure at the level of the community which produces these profits in the first place. The competition would be between various communities to provide the best environment for individuals and business.
Communities provide any number of services, from education, courts, police, water works, roads, etc. It is no coincidence private enterprise only seeks to control those aspects which they can draw profits from. No one cries "SOCIALISM" because our highways are community property. We, the taxpayers, are responsible for maintaining the value of the currency, so any profits from it should be community property.
If you think otherwise, consider who profits from a private monetary and banking system. Odds are, it isn't you. Would you like to see all government privatized. It used to be. It was called monarchy. Want to go back?

[Seth edenbaum]

It sounds like you're giving the house republicans some credit for not buying into the plan.
I don't know how much credit they deserve, but they deserve some.

I'm with Dean Baker on this one I think.

[littleblackpropaganda]

Agreed.

[Thomas Frank]

The only market we have right now is the market of ideas. It's about confidence, and I have confidence in Brad. Let's put it out there.

[LA]

Thom Hartmann advocates bring back the STET tax as an alternate fix.
http://www.commondreams.org/view/2008/09/26

[larry]

Wall Street (and their enablers in both parties) want the taxpayers to shoulder the entire cost. Heavens forbid if Wall Street itself has to shoulder any of the burden. I suggest that the framing or focus on a broad based taxpayer funded bailout is entirely wrong. Since Wall Street created this problem they should tax themselves to pay for the suppossed $700 billion dollar solution that they and the politicians claim will solve it.

It looks like normal volume at the Dow is about 4 billion daily transactions. Slap a measley one dollar surcharge on every one of those transactions, and we're talking $4 Billion a day raised, and that's not including the NASDAQ and other markets (the Chicago exchanges, etc.). Over the course of the year, that would easily approach $900 billion. Hmmm.

[J Thomas]

We really don't know quite what the problem is or how bad it is. This transparency issue....

Let's wait 4 months and see what happens. Things might get worse during that time, and we can spend the first seven weeks looking over the candidates and thinking about which ones we trust. Then we can spend another 9 weeks or so thinking about Bush.

Maybe the economy will tank for a quarter. If it gets so bad we can't recover in that time, then likely an extra trillion or so in government debt wouldn't have helped.

I'm not sure nationalization is the answer. I'm pretty sure that nationalization done by the Bush administration is not the answer.

Pretty much whatever the Democratic congress decides to do in the next few weeks, it's the Bush administration that will be carrying it out. Think about it.

The absolute best thing the US government can do for the next four months is *nothing*.

[dlr]

What's wrong with simply pushing insolvent banks into bankruptcy and selling their assets to a bank with responsible management and a strong balance sheet? Rumor has it that there are plenty banks out there that didn't get caught up in the whole mortgage frenzy. Why can't the takeover of WaMu this week be a template to solve the entire problem?

If the FDIC can be pushed to close down the banks too weak to lend, and sell their assets to banks that are still sound, it seems like the whole crisis would be over. The key of course would be to sell the assets at a price a willing buyer would be willing to spend, but if they managed to do that at WaMu, there has got to be hope. It's hard to believe that any other banks actual balance sheet is further underwater than WaMu's was. The shareholders and bondholders get wiped out of course, but, surely that is better than the US taxpayer taking the hit.

[dlr]

It really seems to me that involving the Federal Reserve is unnecessary. In fact involving the Federal Reserve would be a big mistake. The FDIC is set up to handle this sort of situation. The bad banks shouldn't be nationalized, they should be taken over by the FDIC, and their assets sold. End of crisis.

[J Thomas]

"What's wrong with simply pushing insolvent banks into bankruptcy and selling their assets to a bank with responsible management and a strong balance sheet?"

Don't look where the magician tries to get you to look. Look at what he's trying to distract you from.

The USA has a great big trade deficit. We pay the difference by borrowing money from foreigners.

Some foreigners buy T-bonds even though the interest rate on their inflationary devaluing money is very low. Why do they do that? Perhaps they are making so much money they can't find good investments for it? The foreign economies that are producing so much money are swamped with investment cash, so they park it in the USA?

Some foreigners were buying US mortgages. Completely safe and much higher interest than T-bills. They wanted to buy more mortgages than we had available to sell. So we built more houses and sold them, and sold the mortgages to foreigners. And we jacked up the prices so the same houses could get resold to people who'd have higher mortgages on them. While the prices kept going up it didn't really matter whether the homeowners could make the payments -- when the price went up enough they could take out loans on their new collateral to make the payments, and make a profit selling the houses.

But all of a sudden the foreigners decided they didn't want more US mortgages. The US companies who were selling inflated mortgages got stuck with a lot of useless merchandise.

And we desperately need some other way to get foreigners to give us the money for our imports. The less money they give us, the less we can import. The price of oil will go up and up.

There's still the T-bonds. We get foreign money that way still. But that's money owned by the federal government. They have to spend it before anybody else gets it. Or they could just give it away.

And that's what the Paulson plan does. The federal government gives away the cash it gets from foreigners, and so we can get through the next 4 months without too much of a drop in imports. After that it's somebody else's problem.

[me]

Well, it looks like they settled on a different path;

01 Screw up

02 Leave whoever's elected next November to go to the taxpayers to cover the losses from the screwup.

03 If the Republicans get elected GOTO 01

[Alex]

Bringing up the optio of nationalization (in the Swedish model) needs, IMHO, to be accompanied with a description of what that was and ideally links to sources, reputable of course, that analyze that set up. But so far, all the blogs have NOTHING - which is very frustrating to a curious citizen with little background in economics and next to no background in international economics in Sweden in 1992 and an analysis of it's success/failures and found so far very little. It's making me nervous that we are discussing something (with little detail here) with little information out ther. Jeez - was this a required college course I mangaged to skip and still graduate? However, there is a nice article as a starting point in the IHT from the 22nd of this month - here's a link for anyone interested: http://www.iht.com/articles/2008/09/22/business/krona.php?page=1

[pvm]

the Swedish model only applies where a bank is actually insolvent - e.g. AIG, WaMu, Lehman etc. The Paulsen plan is trying to deal with going concerns who are NOT insolvent but are trying to deleverage their balance sheets (e.g. Citigroup). These guys have no reason to participate in a program that dilutes their equity via warrants or limits management compensation. The regulators cannot take their companies away because they are in fact adequately capitalised.

This means any healthy bank will avoid participating in the Paulsen plan, and will continue to delever / curtail lending, which creates more headwinds for the overall economy. The Swedish model does nothing to solve this problem.

[J Thomas]

PVM, you make a strong argument for chartering new banks.

Let the existing healthy banks that want to curtail lending go ahead and curtail lending. The new banks can lend to good credit risks, and get a good start while the old ones are quiescent.

That way we get more competition in the banking industry, which we need.

[Paul Knitlte]

Suppose we get this under control. The next bailout will be the insurance industry. Cancer is on the rise and there is no possible way insurance will hold out. Then we will have to socialize medicine (or just let people die). And what if we get a dose of the H5N1 virus.

Then we have the food problem. If we cut social programs like food stamps (EBT or whatever the states call it) then manufacturers like Generalmills will be unable to sell their breakfast cereals, because most working people can not afford such, they will eat bulk oatmeal.

The "Crisis" is never ending. How much debt can the US take on?

[paul]

This thing on bailing out "adequately capitalized" banks rings oxymoronic to me. If they're truly adequately capitalized, they have enough reserves to keep operating despite their losses on the sh*tpile. If they would have to fold or curtail operations severely after selling their sh*pile holdings at market (not firesale market, because they're "adequately capitalized", remember) then they're lying to their shareholders and the public about their actual status. And in that case a bailout would let them continue normal operations only if it paid well above market for the securities that were purchased...

This whole "pay us a huge pile of money for stuff we think is worthless or we'll take down the economy" thing is getting old. (And the plan that appears to have been agreed to has way too many subjunctives in it to work under this administration.)

[KF]

Krugman blogged today that he basically agrees with Brad, but that depending on details he might hold his nose and approve the compromise. Here's the Princeton Econ Dept's seminar on all of this from earlier in the week:

[KF]

Guess embed doesn't work. Her's the YouTube URL instead:

http://www.youtube.com/watch?v=Wj_JNwNbETA

[Bill]

You've got our attention today. Now that the deal is torpedoed, maybe it's time to move the Swedish Plan.

http://billsrants.typepad.com/my_weblog/2008/09/bailout-fails-done-deal-undone-time-for-another-approach.html

[Measure for Measure]

PVM: Great post.

So we have 2 types of financial institutions, the insolvent and the solvent but highly leveraged.

Paulson, Dodd-Frank-Paulson, nationalization and expedited bankruptcy can all address insolvent institutions.

So what about solvent institutions that are de-leveraging and thereby curtailing lending?

Loose monetary policy would probably help (but how much?). Expedited bankruptcy doesn't apply (though I guess I could imagine a unilateral conversion of debt into equity).

As for the other choices, the original Paulson plan would work if the the toxic assets were purchased at a premium, though this would be blatant corporate welfare. The other 2 options might work as well. Citigroup for example has been selling new equity to various sovereign wealth funds. Is it not plausible that they would accept equity infusions from Washington?

[Jonathan Brown]

How different is this approach to that rendered to Washington Mutual?

[Edward Soong]

Do Nothing is still a possible alternative here. In 1929 - 32, there were no FDIC and we have that now. We also have Social Security just to name of a few. The safe guards were put in place. I do not see a duplicate Great Depression happening again. Definitely no bail out. Taxpayers are not responsible to help those who made a bad decision. It is call capitalism. Survival of the fittest. The main problem here, media has not discussed at all, it is rooted in the war in IRAQ and Afganistan. We should not be there in the first place at all. Billions of dollars are wasted over there every month. Those are the dollars that can be spend here in the USA, for the credit market for example. As for the war to stamp out terrorism? Well, it is still here. Why not try another approach as proposed by the Presidential Commission two Decembers ago. Talk and communicate to muslims and their supports. Love conquers all and has a lasting effect. Not wars, it creates hatred for generations to come. Jesus did say in the Bible "Love your enemies". When an enemy feel loved, why would they fight?

[P-DuB: Objectivist, Atheist and last man of reason]

Nationalization? Seriously? You cannot have realistic economic growth and a reasonable free market system when you envelop it with an artifical system of control like nationalization. We are NOT France, we are NOT Sweden. You cannot allow Nationalization to occur, as it would destroy the tennants of our economy: freedom to invest and capitalize as much as possible. The problem we face is that too many people and institutions made poor choices and we are not allowing them to fail. If your 13 year old son decides to take your car for a joy ride and crashes it, you don't go out and buy him ANOTHER CAR. You make him face the consequences, no matter how harsh. Yes, you are now also without a car, but shouldn't you have had better control of your child? Same with with our current markets. This is a direct result of a lack of morals, common sense and concept of personal responsibility in this country. We will all suffer (as we should) for being complacent and allowing it to happen.

This, my friends, is a rare chance to hit the reset button.

We are more afraid of living through hardship which can result in great rewards than we are of taking the easy path with leads to disaster. This country is becoming weak, and this current crisis is a case in point.

[J Thomas]

OK, your 18-year-old son has crashed his car. And you cosigned for the loan. He now owes $40,000 and he has $8,000.

The loan company can take his $8,000 and destroy his credit and you will have to take out a loan for $32,000.

Or you can take his $8,000 and get a loan for $32,000 more and he keeps his credit.

Or you can do nothing at all, and then they take his $8,000 and both of you lose your credit ratings.

Or you can borrow $40,000 for him and tell him he can keep his own $8,000.

Or you can borrow money to give your son $40,000 and a new car, and that way he can keep driving to his job at the casino, and if he takes his wages and plays them at the casino someday maybe he'll win and he can pay you back. That's the bailout plan.

With many of the plans you can have the crashed car. You can sell parts off it. Maybe some of the parts will get so valuable you'll make money on the deal.

[Beverly Escobar]

This was pretty good...
This would work for me. Similarly - could work for the 700 billion financial institute bailout.
Hi folks,
I'm against the $85,000,000,000.00 bailout of AIG.
Instead, I'm in favor of giving $85,000,000,000 to America in
a We Deserve It Dividend.
To make the math simple, let's assume there are 200,000,000
bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman
and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals
$425,000.00.
My plan is to give $425,000 to every person 18+ as a
We Deserve It Dividend.
Of course, it would NOT be tax free.
So let's assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the folks
who lost their jobs at Lehman Brothers and every other company
that is cutting back. And of course, for those serving in our Armed
Forces.
If we're going to re-distribute wealth let's really do
it...instead
of trickling out
a puny $1000.00 ("vote buy") economic incentive that is
being
proposed by one of our candidates for President.
If we're going to do an $85 billion bailout, let's bail out
every
adult U S Citizen 18+!
As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here's my rationale. We deserve it and AIG doesn't.
Sure it's a crazy idea that can "never work."
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion
>We Deserve It Dividend more than I do the geniuses at AIG or in
Washington DC .
And remember, The Family plan only really costs $59.5 Billion because
$25.5 Billion is returned instantly in taxes to Uncle Sam.
Ahhh...I feel so much better getting that off my chest.
Kindest personal regards,
A Creative Guy & Citizen of the Republic.
PS: Feel free to pass this along to your pals as it's good for a
>> laugh
>>
>>

*********************************

Just an analogy - but a petpeave of mine - of our fine government - selling the farm!

The analogy is absolutely right on . . . Maxine tells it like it is!!!!

I bought a bird feeder. I hung it on my back porch and filled it with seed. What a beauty of a bird feeder it is, as I filled it lovingly with seed. Within a week we had hundreds of birds taking advantage of the continuous flow of free and easily accessible food.

But then the birds started building nests in the boards of the patio, above the table, and next to the barbecue. Then came the poop. It was everywhere: on the patio tile, the chairs, the table everywhere! Then some of the birds turned mean. They would dive bomb me and try to peck me even though I had fed them out of my own pocket. And others birds were boisterous and loud. They sat on the feeder and squawked and screamed at all hours of the day and night and demanded that I fill it when it got low on food.

After a while, I couldn't even sit on my own back porch anymore. So I took down the bird feeder and in three days the birds were gone. I cleaned up their mess and took down the many nests they had built all over the patio.

Soon, the back yard was like it used to be.... quiet, serene and no one demanding their rights to a free meal.

Now let's see. Our government gives out free food, subsidized housing,free medical care, and free education and allows anyone born here to be an automatic citizen.

Then the illegals came by the tens of thousands. Suddenly our taxes went up to pay for free services; small apartments are housing 5 families; you have to wait 6 hours to be seen by an emergency room doctor; your child's 2nd grade class is behind other schools because over half the class doesn't speak English. Corn Flakes now come in a bilingual box; I have to 'press one' to hear my bank talk to me in English, and people waving flags other than 'Old Glory' are squawking and screaming in the streets, demanding more rights and free liberties.
Just my opinion, but maybe it's time for the government to take down the bird feeder.
If you agree, pass it on; if not, continue cleaning up the poop

[J Thomas]

"So divide 200 million adults 18+ into $85 billon that equals
$425,000.00."

Unfortunately, no.

$85 billion / 200 million = $425.

Check it? Divide both sides by a million. You get $85,000/200.
Divide both sides by a hundred. You get $850/2. $425.

Closer if you use the assumed $700 billion.
$700,000/200 = $3500
And of course it could easily grow to double that, $7000 each. Or double again, $14,000.

[Stretch]

Although I'm beginning to understand the salient points to this situation, I imagine, like me, there are many citizens that don't really understand the full spectrum of this thing. One thing's for sure, they say economics is the art of managing the resources of a community. Or, it's the science of treating the production, distribution and consumption of goods and services. One thing I'm sure we can all agree upon concerning the solution to this problem: If economics is art, then no one can agree on art. If it's science, then scientists have multiple theories for every subject. Seems as though there's no shortage of economists, or ordinary people, who differ on exactly what coarse of action to take.
Some say doing nothing is the answer---let the rich lay in their beds. The Great Depression can't be duplicated because we now have FDIC, SS, and other instruments to prevent a repeat. I thing that's a pretty bold statement: We can't fail again, because we took action to prevent it from happening again? Murphy's law proves that something can always fail. There is more that one road or path leading to a full-blown depression!
The Swedish plan may work. But someone else pointed out, we're not Sweden. Within our government the interactions between our business institutions inter-face much differently than under the Swedish government. Not sure our form of government is set-up to effectively accomodate a partial nationalization of one area, with the kind of capitalistic inter-face with other major institutions.
If we "bail-out," it does seem we're giving the rich, casino players a free pass. Yet a lot of comments seem to make a big difference between investors and taxpayers. I think at least 50% of the taxpayers today are also investors. Look at any retirement or 401K plan, and you'll see taxpayer money hard at work in investments.
I'm not smart enough about economics to even offer my version of "here's what we gotta do." I only hope that my elected representatives are smart enough to know that their typical constituent doesn't understand enough about the topic to tell the house/senate how to vote. I'm curious to find out whether I've voted for the people I think will do what's best for my country/state and not trying to preserve/secure another term in office.
We of course have the luxury of being a Monday-morning quarterback. If our reps do the right thing, they're golden, if they do the wrong thing, well, they'll know it.

[Jason Stoons]

Wow. I like this weblog. Brilliant comments and solutions.

Let's go with No Bailout.
Let's go with No More Complex Financial Instruments.

There's plenty of money out there, it's just not in the hands of the failing financial houses, and they are whining.

What does the Architect of Financial Deregulation, Mr Phil Gramm, have to recommend? Or the Republican bully Tom Delay?

Curious how there has been no coverage and questions asked of these two gentlemen. We need their guidance in these difficult times.

Ha ha ha urgggggggggggggh!

[Brian]

Posted by: J Thomas | September 30, 2008 at 02:12 PM

"So divide 200 million adults 18+ into $85 billon that equals
$425,000.00."

No, that's $425. Learn math.