by Damozel | Cactus at Angry Bear has some concerns about Obama's failure to oppose the ongoing bailout binge. They are to a large extent the same reservations Deb has expressed (see links after the jump).
"To me, [the bailout] was the financial equivalent of invading Iraq because Osama hit us on 9/11," Cactus commented yesterday, one month after the bailout passed. On October 15, when the "ridiculous bailout bill" passed Cactus wrote forebodingly:
The bail-out will succeed only, repeat, only in the sense that the US succeeded in Iraq in 2003 and 2004 when Simone Ledeen and the rest of the Heritage interns were running around the country handing out trash bags full of money and giving Halliburton money for services it would never begin to render....To be extremely precise, this is what I think the success will look like: shady, undeserving characters will be enriched, young versions of the idiots who got us into the mess will launch successful careers (can you say "Kashkari"?), and the promised benefits to the American public, the schmucks footing the bill, will never materialize.
The reason the bail-out won't succeed, like Iraq, is that it doesn't address a real problem. Banks going under is not a problem. Bankers having incentives to make risky decisions is a problem, and this bail-out will do nothing to stop it. (Non-voting shares, remember?) My guess is that we'll find some entities (and I would bet money Goldman Sachs will be on that list) will be found to be gaming the system. There will be a tsk-tsk when that comes to light, but they will not have to pay back the gubmint for gaming the system.
The bigger problem, that there was a housing bubble, and that home prices cannot and should not stay as high as they have been is not addressed by the bail-out. If it ever does get addressed, it will be addressed in a counter-productive way.
The even bigger problem, that the American public has been stretched thin financially for years now and can't afford the sort of consumption that makes up about two thirds of the economy is also not going to be addressed by the bail-out. (Angry Bear 10-14-2008; emphasis added)
Cactus did have one suggestion:
I figure if the gubmint doesn't get any say in how banks do business (exactly why is it so important to keep the "talent" that created this mess in the first place?) and foots the bill, can we at least require every bank that takes government money to include the words "Welfare Queen" in its name?...It might make a few members of the voting public realize exactly how the system work. (Angry Bear 10-14-2008; emphasis added)
So. A month has gone by.
And now?
We now know the banks are not loaning out money which was the thing this whole bail-out was supposed to accomplish, but Goldman, Welfare, Queen, & Sachs (to borrow a term from Lambert Strether left at the previous post) has made out like the proverbial bandit, Kashkari's career is made, and the American public would be better off being beaten with a stick than having to pay for this garbage. (Angry Bear 11-15-2008)
So Cactus is concerned that Obama isn't jumping right off the bailout bandwagon.
[N]ow that we know the thing not working, and Paulson isn't even pretending it was intended to work as advertised, isn't it time to pull the plug?
Shouldn't the President-elect be out there, demanding an end to this waste of money? Shouldn't he be calling on Congress to pull back the money that hasn't already been thrown away? Shouldn't he be proposing some other alternative? (If the problem, as we were told a while back, is that banks aren't loaning money, and they're still not loaning money, why is it worse for gubmint to loan money directly to people and corporations that need it than it is for the gubmint to find all sorts of ways to help Paulson's former employer?)
Instead, there's all this talk about spending even more money on even more undeserving people and companies in a wider variety of industries, and Obama is not saying anything to discourage any of this. (Angry Bear 11-15-2008; paragraphs inserted for emphasis)
Several Angry Bear commenters who responded to cactus's post argued that it's not exactly Obama's place at the moment to drive policy. I don't disagree with this, but all the signs indicate that Obama believes that more of the same, but handled more adroitly and with more oversight (e.g., the plan to bail out the auto industry), is our best hope for a less bad economic collapse.
One of the AB commenters remarked:
Congress, whether under Dem or Repub control, seems to still be harboring the illusion that if they simply support and shore up business and the free market all will be right with the world....Ill informed and taking direction from the foxes of finance, the Congress seems only to follow along like a lamb to the slaughter....
Nothing has changed. What is being spent, whether through TARP or some other form of corporate welfare, isn't reaching the public. Nothing will change until people have money to spend with less borrowing. The Congress was supposed to be trying to save the economy, not the banking industry. The economy is buying and selling. Lending is important, but it's the second step. Selling, buying and then borrowing, if need be.
That's the order of the business cycle. Why the devil is the Congress, and the President (elect or current) focused only at the end of the process?
Cactus voted for Obama (as all of us did) and wants to give him a chance. (Angry Bear) So do we. But as the collapse of our economic system continues, we have the same worry: that Obama seems to contemplate doing more of the same thing that isn't working now.
And that ain't good.
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