Arguing for the bailout.

[randomness]

Those who advocate a bailout should meet this minimum standard: they need to make the case that borrowing or taking $2,000 or more for each of us Americans and using it to bail out the various financial institutions is a better use of that money than simply letting those institutions go bust, and sending each of us a check for $2,000 instead. Or even not borrowing or taxing that $2,000 per person in the first place, and just letting the companies go bankrupt.

They can try making the case that the alternative to borrowing or taxing us an extra $2,000 each is a depression. It's almost certainly true that for most people, avoiding a depression is worth more than a $2,000 check. But they need to explain why dire consequences will occur if they don't get the money, not simply wave their hands and tell scare stories. Uncertainty in their explanation is fine. The situation is fluid and no one can be sure about many details. Obfuscation is not.

One might say that it's a very difficult bar I've set, and that Americans simply don't know enough economics to understand the explanation. In that case, I'd say then it's certainly past time educating the American people about economics. They can make that part of their explanation.

I say this as someone who suspects some action may end up being a good idea. But I still haven't heard a conclusive argument for action in general, and no convincing argument for this bailout in particular.

If you want our money, you have to convince us why we should give it to you. It's up to you to convince us.

Comments

[tamidon.livejournal.com]

I asked my mother ,a very high end securities lawyer, why AIG was getting bailed out. She said it would take down the world if we didn't. Everything they insure would, legally, have to be grounded while things are dealt with. They cover over 900 airplanes internationally alone,most shipping by land, air, and sea. That's just a small part of it. They hold a huge amount of the insurerance debt for hurricane, that would have to be stopped payment until dealt with. Apparently it would be much bigger than just a Wall Street issue

[r-ness.livejournal.com]

The AIG bailout was last week's bailout, and more or less a done deal at this point.

This bailout is a new, different, and much larger one.

[drwex]

Yeah, AIG was really too tentacled to be allowed to collapse. My understanding of the AIG bailout is that it's structured as a finite-term bridge loan to be repaid by the orderly sale of assets(*). That makes a whole lot more sense than the current 3-page proposal that the administration wants turned into legislation post-haste.

(*) AIG turns out to own a boatload of non-insurance stuff, most of which is profitable on its own.