Quote:
Originally Posted by Broadsword2004
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I think it illustrates the problem nicely. From the article:
"Because punishment will be served. Justice will be done. Revenge will be savored."
From inception, the policy has been called a bailout. But it may be worthwhile to pause a moment and ask who is being "bailed out"? Who gains from the "bail out"? Who loses if it goes into effect, and who loses if it does not? These are not rhetorical questions; rather, they may serve to illuminate the problem.
When a bank is bailed out, the shareholders will lose much, and perhaps all of their investment. Were the shareholders the ones who created the crises? Hardly; they may be guilty of a poor investment choice, but little other than that. The senior executives and the board bear responsibility, but their punishment consists of losing their jobs. The rest of us - the society as a whole - suffers the consequences of reduced availability of credit coupled with reduced business activity. So in pursuit of justice, we have punished ordinary people who seek to find a job or run a business. This does not seem productive or appropriate. Thus, we are not bailing out the purported rich wall street bankers so much as we are attempting to bail out the national and global economy.
The article suggests that the sharp pain of recession will be brief, but salutary, and will impose the discipline of the markets. Perhaps. As we scourge the improvident and the foolish, what price will we pay in terms of future economic activity? We can look to history for an answer. England used to have a debtor's prison, where those who did not pay their bills could be incarcerated until the debt was paid. The U.S. chose not to adopt that model. Why? Could it be that there is more to be gained by writing off the debt and letting the debtor return to economic life? As a thought experiment, should we consider re-instituting the classic approach, and jail those who do not pay their mortgages? How much pain (punishment) should we hand out? What is the optimum level, from the perspective of the country as a whole?
I get the sense that many agree with the quoted sentiment - someone, somewhere, needs to be punished. Someone, somewhere, needs to be flogged. And if that someone happens to be a rich guy that got tripped by his own sly plots, so much the better. This is, however, overly simplistic. The purpose of the bill is not, and never was, to save the rich. Rather, the real cost, whether there is a bailout or not, will be paid by the middle class taxpayer. It becomes a question of how we want to pay. We should choose wisely.
I wonder if a sense of angry moral outrage, such as the article seems to voice, brings us closer to a rational decision. I think it does not.