Was the bank bailout necessary?
OPS_admin | May 19, 2009 | Comments 0
Was the bank bailout necessary? – | Dean Baker
Saving zombie banks supposedly prevented financial collapse. But would letting them fail really have been so bad?
US Treasury secretary Timothy Geithner says that we don’t need to bail out the banks anymore based on the results of his stress tests. We should follow up quickly on his assessment and start shutting the special Fed lending facilities enjoyed by the banks, the FDIC loan guarantee programme and the AIG slush fund.
However, given the hundreds of billions that have already gone out the door, it is still worth asking whether this bailout was necessary. The argument made by many economists was that it would cost taxpayers more money to do an FDIC-type takeover of banking behemoths like Citigroup and Bank of America than the tens of billions handed over to keep them afloat. In their story, the taxpayer bailout of bank stockholders, bondholders and top management was an unfortunate side effect.
While the next step in this argument is a calculation of the cost of a bite-the-bullet now approach versus a handout-and-wait strategy. With the right assumptions, the handout-and-wait strategy can be shown to come out on top, so we really were just helping ourselves when we gave hundreds of billions of dollars to the bankers that wrecked the economy.
via Was the bank bailout necessary? | Dean Baker | Comment is free | guardian.co.uk.
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A new report by the Royal Society, chaired by Nobel prize-winning biologist Sir John Sulston warns that world population must be stabilized and consumption in wealthy nations must be reduced or the entire planet is in big trouble. As the report reads: "The number of people living on the planet has never been higher, their levels of consumption are unprecedented and vast changes are taking place in the environment. We can choose to rebalance the use of resources to a more egalitarian pattern of consumption... or we can choose to do nothing and to drift into a downward spiral of economic and environmental ills leading to a more unequal and inhospitable future."This is the same warning that President Jimmy Carter gave Americans back in the 1970's - but it was ignored when Ronald Reagan came to power with a "more positive" message basically telling Americans we can do whatever we want. And then after 9/11 - Bush told us all we should go shopping and consume ever more.And now with corporations calling the shots in Washington - long-term sustainability of the planet takes a back seat to short-term profits. If we don't change our ways soon - and embrace clean, alternative energy and educate women around the plant - then we all could be headed for a rough century.-Thom(Is there any chance we will learn in time? Tell us here.) -
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