The more I watch CNBC's Larry Kudlow smile and Suze Orman gab, the more I get angry about the federal government's bailout of deep-pocketed investors and executives on Wall Street with AIG and now who knows which big financial giant.
Congressional and Bush administration leaders meeting behind closed doors means bad news for taxpayers. Orman claims more than 100,000 jobs were saved around the world with the AIG bailout. She also says the government will make a profit from taking over the bad assets of a worldwide insurance company. I didn't know that the federal government should get in the worldwide insurance business and try to make a profit.
I certainly can see the argument about saving homeowners from more foreclosures with the bailout. But as far as easing credit markets for economic expansion, this nation will not begin to recover in jobs and business activity for at least another 12 months.
Is there not a way to direct all the money in the bailout directly to the homeowners and insurance policyholders instead of the bloated Wall Street financiers?
Do you want your government to buy up trillions of dollars of bad debt on Wall Street?
Is what's going on in Washington really for the good of the American people?
No. And as usual, the Bush administration is asleep at the wheel.
People and financiers with big money should have to pay for their greed that caused this mess in the first place.
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This is a time for cool reasoning and the long term view from our elected officials and regulators, not emotional response and panic.
We must create liquidity while respecting moral hazard.
The only way a bailout as imagined here can work -- and not cause far greater harm and a repeat of this same scenario in the long term -- is to structure something that respects moral hazard.
Bad loans the government takes over should be tracked and any losses incurred should be transferred back to the institutions responsible for them in the form of taxes on future profits and/or penalties.
Otherwise we are rewarding and encouraging the behavior that led up to this. Our nation deserves better than Ponzi Scheme Economics. Real changes are required to our economic system to get on track for sustainable and robust long-term economic growth -- this crisis is a rare opportunity and catalyst -- we must not sacrifice it in the name of panic and short term relief.
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