Approve the Paulson plan with one, and only one, modification: instead of giving the Treasury Secretary the power to spend $700 billion, hire Warren Buffett to do it.
“I bet they’ll make a profit,” said Buffett, who pointed out that hedge funds specialising in junk assets were already picking up mortgage-related securities with a view to making profits of 15% to 20%. He said a positive return was feasible if the government ignores the book value of instruments or the original cost to banks and instead pays the prevailing market rates for the bombed out assets.”They’ll pay back the $700bn and make a considerable amount of money if they approach it like that,” said Buffett. “I would love to have $700bn at Treasury rates to buy fixed-income securities—there’s a lot of money to be made.”
I wonder, sometimes, what it would feel like to live in a country that is *actually capitalist*. Or, conversely, one that was actually and forthrightly socialist. Instead, we seem to make the losses public but privatize the gains. Which means the millionaires get bailouts even when they nearly tank the US economy, and the taxpayers have to foot the bill every single time. Where are all the “conservatives” with their “market-based solutions”? Its just hypocritical garbage like I’ve always suspected. The “market” only comes up when its convenient for the powerful. When the powerful have to pay the price for their failures, then suddenly we have to rush to the rescue. It is the perfect inverse of anything resembling justice.
If I expected anything better from the government, I’d be pretty angry. As it is, its just this familiar old nauseated feeling.
Instead, we seem to make the losses public but privatize the gains.
That’s exactly it, and exactly what conservatives are complaining about; it is, oddly enough, one of the principal economic tenets of fascism. It’s important to remember in this case, though, what the assets are: people’s mortgages, people’s homes. Thus, two things: one, the suggestion from a lot of folks that the government put that money in at the level of the individual homeowner, and stabilize the market that way (people would of course be required to put the money into their houses and leave it there, not spend it on other things); and two, the fact that this isn’t exactly government spending money. That’s why Buffett (among others) are saying that if the plan is executed wisely, the government will break even or perhaps make a profit.
I should add a further comment here, I think, to clarify. The reason why a bailout is necessary is to protect the savings and investments of millions of Americans; absent a bailout, it’s not just the rich who’d get hammered, it’s also the middle class. (I know we’re looking down the barrel in several ways.) I think conservatives and liberals are in agreement that if the bailout primarily serves to keep the rich folks who created this problem rich, then it will have failed; they need to take the full brunt of their bad decisions.
But remember this: among those people who need to bear that brunt are a lot of politicians, and the folks at the head of the Fannie/Freddie line are Democrats: Christopher Dodd, John Kerry, and, yes, Barack Obama.
I think that having the government cover $1000/month of my mortgage for a couple of years would help immensely . . . 🙂