CNN: Why Bankruptcy is the best choice

[Aranince]

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html


...
The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.

Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

I guess I needn't be afraid of CNN after all. I think its a great article, Digg it!

[Iscariot]

oooh yeah! dig it, yeah! (http://www.youtube.com/watch?v=8Igui65gY5M)

[shfreelance]

oooh yeah! dig it, yeah! (http://www.youtube.com/watch?v=8Igui65gY5M)

Reminds me of Duff Man, Oh Yeah!

[Anuba]

Uh... he's a libertarian. What else would he say?
Just because CNN throws a bit of equal opportunity in the mix doesn't mean they're suddenly Rush Limbaugh News, Inc.

[SactoGuy18]

In my humble opinion, they're going about fixing the problem the WRONG way.

The Federal government should institute these steps to clean up the mess:

1) Create the equivalent of the Resolution Trust Corporation to buy up and sell off in an organized manner all the bad mortgage loans.
2) Temporarily suspend the mark-to-market valuation section of the Sarbanes-Oxley Act (that right there would clean up 80% of the mess, according to some estimates).
3) Impose strict margin requirements on any derivative or hedge fund trade--30% at minimum. That right there will discourage the type of out-of-control speculation that drove up the price of oil to ridiculous levels earlier this year and drove down the price of financial stocks through naked short selling recently.
4) Break up both Freddie Mac and Fannie Mae into 12 competing companies that have NO direct Federal involvement.
5) In the longer run, throw out our current Federal income tax system and start over from scratch with the consumption-based FairTax system.

Whoever becomes the next President and implements this five-point plan will become a national hero. :)

[iShater]

I agree that we should let these companies go bankrupt, and those with the financial strength and stability to buy them out. That would happen to my house if I went bankrupt.

[Anuba]

I agree that we should let these companies go bankrupt, and those with the financial strength and stability to buy them out. That would happen to my house if I went bankrupt.
Sure, in theory, ideologically, it's the right thing to do. People want to see those bastards punished. But in reality, the Wall Street execs are the only ones who will walk away unscathed no matter what. You can't get to them this way.

Method A: Bailout.

- Main Street Joe can keep his house and his job.
- Wall Street Joe will be having champagne and beluga caviar for breakfast.

Method B: No bailout.

- Main Street Joe ends up a homeless bum.
- Wall Street Joe will still be having champagne and beluga caviar for breakfast.

Either way, the little guys are the ones who will suffer the blow. The only choice they have is between a punch in the stomach (bailout) or a bullet in the head (no bailout).