Here is what I understand to be the "logic" of this proposed bail out of our financial system:
1. Too many distressed, illiquid assets exist in our present fiancial system, and this poses an extreme risk to the entire economic system.
2. We can't afford to take that risk.
3. Therefore, we have to "bail out" the financial system by providing a taxpayer "market" for those illiquid assets which are creating an unacceptable risk to our entire economic system.
Now let us segue to leftist Democrats. They say they understand that we can't take the risk that our economic system will go under, but then they are willing to take the risk with a "Christmas tree" bill. If it is acceptable to risk that the bail out will not work, why do the bail out at all? The entire logic of the bail out is that it is unacceptable to risk the failure of the entire economy by standing on principle.
The least "risk" here is adding a homeowner bail out to the bill. Why is that the "least" risk? It is not because that has inherently more merit, although it is difficult to argue homeowners should not be bailed out when Wall Street and banks are being bailed out. Rather, it is that the only real risk you are taking with the bill by adding that provision is losing enough votes so the while bill will not pass. That risk seems relatively small, and you should be able to tell whether you have the votes.
However, let us consider some of the other leftist Democrat proposals designed to "protect" the taxpayers and "punish" Wall Street. These include: (1) limiting "executive compensation", (2) requiring that the taxpayers receive an "equity interest" as part of any asset purchases, (3) the proposed (ridiculous) "transparency"where every transaction will be immediately subject to criticism on the internet, (4) and the idea of limiting the amount of taxpayer money at risk until we "know" the program is working. There are other "Christmas tree" items, but let us consider these four.
They all share the same problem. The least risk of including any of these items is the risk that you will lose too many votes to pass the bill. Remember, the whole idea of this bail out is that we are doing something unpleasant, and that we would prefer not to do, because we can't afford to take the risk of not providing instant liquidity into the system. Every one of those "Christmas tree", leftist proposals (see previous entry) that I list is extraneous to the main purpose of the "bail out", and creates a substantial risk that the "bail out" will fail.
If any substantial risk thtat the "bail out" will fail is acceptable, why do the "bail out" at all? If we are willing to risk the economy on principle, why not simply refuse to set a terrible precedent here, and refuse to use taxpayer money to do this kind of "bail out". We are supposedly willing to risk taxpayer money because we have no choice, and cannot afford to risk failure of the economy. Yet, leftists are saying that it is accpetable to risk failure of the economy (failure of the "bail out") to uphold leftist "principles" here. There is no longic to that. If we are going down that road, then we should not do the "bail out" at all. See my entries yesterday, where that is exactly my position.
We should not do the "bail out" at all. The precedent is simply to devastatingly bad, whatever the risk to the present economy. If you say you disagree with me, as Senator Charles Schumer and the Democrats like Barack Obama seem to say, then you are saying that "risk" of the economy failing is not acceptable. If you then turn around and say that risk of failure is acceptable, then you are contradicting yourself. You are then admitting, in effect, that I am right and we should not do this at all, because you are admitting that principle is more important than a risk that the economic system will fail.
Take "executive compensation". It is probably the "least" risky of the leftist, Christmas tree items. Yet, it creates a substantial (if not measurable) risk that the "bail out" will fail. That is because executives running corporations "at risk" do not have to sell assets to the Feds. They can take their own risk, to save their own salaries, and roll the dice. Even more importantly, the idea (as I understand it) of the "bail out" is not just to "save" financial institutions in danger of failing. It is to provide liquidity so that financial institutions have money to lend to homeowners and "main street". If executives of solvent, buthamstrung, financial institutions have their own compensation at state, why should they sell assets to the Feds just to be able to provide more iiquidity to the system?
Yes, maybe they will. Maybe they will be "patriotic". Or maybe the pressure will be too much for them to withstand. But the risk is substantial, and every "Christmas tree" item added to the proposed bill increases the risk of failure (probably geometrically). Yet, we are being told that the "risk of failure" is unacceptable.
Nope. if leftist Democrats get their way on this, it will confirm my view that we should not do this at all. If risk is acceptable, we should take the better, more principled risk of not bailing out private entities with taxpayer money. Do other things to try to help with liquidity. Encourage private "bail out" funds (waiving anti-trust laws, if necessary). There are things that can be done. Yes, the risk is there. But we are evidently willing to consider substantial risk that the bail out will fail. I know the risk I would rather take.
Can you see why Republicans are "at risk" here, including John Mccain. If they "cave" to the idea that the real purpose of this bill is not necessity, where we can't accept the risk of failure, but that the real purpose is a "punishment" of Wall Street and imposition of leftist central planning; then Republicans will have completely sold out their principles with no assurance it will even work--inserting risks that make it possible, or even probable, that the "bail out" will fail and even more government control will be attempted (a danger anyway).
I hope this explains why McCain and the Republicans are at substantial risk here that I will disown them all over againg for betraying (again) every conservative economic principle in which I believe. Now I don't delude myself that they care about me. However, I think there are many others who feel the same way.
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