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Sunday, September 21, 2008

Although I have too-little understanding of the economics involved, something must be said on the historic $700B+ bailout of the banking sector, an event so significant that it may well be used in the future to date the debut of a new stage of capitalism in which government and multinational corporations are so entwined they are literally impossible to tell apart. But I'm pretty outclassed here: all I know is that I'd like to see a Second Great Depression avoided and I'm willing to make significant short-term sacrifices in order to see that happen. That said, most of what I'm reading from left and center-left economists suggests to me that this bailout won't see that goal accomplished and will in fact only make things worse:

* Krugman: "I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets."

* Sebastian Mallaby: "With truly extraordinary speed, opinion has swung behind the radical idea that the government should commit hundreds of billions in taxpayer money to purchasing dud loans from banks that aren't actually insolvent. As recently as a week ago, no public official had even mentioned this option. Now the Treasury, the Fed and congressional leaders are promising its enactment within days. The scheme has gone from invisibility to inevitability in the blink of an eye. This is extremely dangerous."

* Robert Reich: "The Bailout of All Bailouts is a Bad Idea."

* William Greider in The Nation: "If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims."

* Calculated Risk: "Think of a drunk gambler at a slot machine. He starts with $100 and slowly loses. Every now and then he wins some money, but he keeps putting the coins back into the slot until he has lost everything. That is how this plan will work."

* Brad DeLong: "There is no way in hell that anybody should give any extra power to any Treasury Secretary chosen by John McCain. I beg the Democrats in congress: write a bill that makes sense."

* Atrios: "Any member of Congress who looks at the plan to give Hank unchecked power to transfer $700 billion from the Treasury to his friends' companies and has any reaction other than 'You've got to be fucking kidding me' does not deserve to hold office."