Alternative Bail-out Ideas

JeffB · Sep 24, 2008

Invisible Fan said:

Note that this analysis, even if correct, does not conclusively disprove the need for a bailout bill. The Paulson proposal, as revised over the weekend, now extends to foreign banks and hedge funds. A hedge fund crisis, which Nouriel Roubiini says is the next shoe to fall, would hit prime brokers like Goldman and Morgan Stanley particularly hard. The Lehman bankruptcy nearly deep-sixed the financial system. Goldman and Morgan are bigger firms. If either were to look wobbly, even after their pending capital infusions, it would roil the markets.

But it sure puts a crimp in the thesis.
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Nouriel Roubiini's HOME plan via OpenLeft:

For what its worth at this late date, the following plan makes a lot more sense than the Paulson plan, even with the proposed Congressional add-ons. It's proposed by Nouriel Roubini, a professor at NYU's business school who saw this coming much earlier and more clearly than most anyone.
http://www.rgemonitor.com/roub...
Though it looks like Congress may end up moving fast on this, I'd love to see the netroots push this one hard, in conjunction with the elements of the "financial expert" community that are coming around to Roubini's way of thinking. Here are the highlights:

Roubini proposes a program he calls HOME (Home Owners' Mortgage Enterprise), which is basically an updated verion of the Great Depression's Home Owners' Loan Corporation (HOLC). And its got an even more politically attractive name, since it reminds people that helping Americans keep their homes is a lot more important than asking these already-stressed homeowners to bail out wealthy elites whose serious gambling problem is on the verge of taking down our economy.

Roubini explains how his HOME-focused approach is more important and would be more effective than the attempt by Paulson (and now Congress) to do an RTC-like bailout of financial institutions.
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"O]f the five possible uses of fiscal policy - income relief to households (the 2008 tax rebate), rescue/bailout of financial institutions (Bears Stearns, Fannie and Freddie, AIG), purchase of assets of failed institutions (an RTC-like institution), recapitalization of undercapitalized financial institutions (an RFC-like institution), government purchase of distressed mortgages to provide debt relief to households (an HOLC-like institution) - the last option is the most important and effective to resolve this severe financial and economic crisis...
Creating a new HOLC mechanism is likely to be more effective than creating a new RTC (whose purpose was to buy and dispose over a number of years of the assets of already failed S&Ls)...

"An RFC mechanism may be necessary once an HOLC is created: purchasing mortgages at a discount implies banks taking an additional capital hit (if they have not already written down the value of such assets or have not provisioned for the loss with loan loss reserves); therefore the purchase of such assets will further undercapitalize such institutions that do need more capital. So the government injection of capital with preferred shares will allow distressed but solvent banks to increase their capital and thus not to be forced to contract further credit as it would be the case if they remain undercapitalized."

So, Roubini who has seen this coming earlier and more clearly than most anyone, proposes we:

1. Focus first on funding a HOME program to directly help mortgage holders;
2. Once this is done, it'll be clearer which financial institutions are ailing but solvent (vs. insolvent) and therefore worthy of government support.
3. When that support is extended, taxpayers should be granted preferred shares that are "senior to common shares and other preferred shares (and carry a high enough dividend)."

These taxpayer shares, Roubini says, "should also be senior relative to all of the other creditors of the bank (with the exception of insured deposits)."

[T]hus, no more of the bailout of unsecured and sub-debt creditors that occurred in the case of Fannie and Freddie. Sub-debt holders of banks (and creditors other than insured deposits) should be appropriately whacked if needed to ensure market discipline and avoid future moral hazard [bolding mine].
Roubini also proposes ten steps that need to be taken to reform our financial system, including direct regulation of what he and others describing as our "shadow banking system."

http://www.openleft.com/showDiary.do?diaryId=8511
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AGBee · Sep 24, 2008

DaFingerWag said:

There's 350 million of us living in this country. The bailout is 700 billion. I suggest each of us receive 2 billion each instead of giving the whole amount to the fat cats. Problem solved.
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You forgot to carry the 1.

weslinder · Sep 28, 2008

A buddy of mine had an idea for a small provision that would ensure that no taxpayer money beyond what is absolutely necessary to plug the holes get spent. Every company that takes a bailout loses their limited liability protection for the largest shareholders until all of the money is returned to the taxpayer.

Although I'm sure some banks will still allow the government to take really bad securities, I'm also pretty sure that a lot of Chicken Littles will decide that the bailout isn't as necessary as they are currently claiming.

JeffB · Sep 30, 2008

The Washington Monthly on why not to follow the Swedish model and nationalize the banks:

When Politics Fails

Ezra is absolutely right to say that our failure to respond in any coherent way to the economic crisis is a deep political failure:
"This is a failure of politics. Like with global warming, with health care, with the national debt, with immigration. It is further proof that we have a calcified political system incapable of responding to either long-term threats or short-term crises. The electoral and partisan incentives have made actual action too dangerous and rendered obstruction everyone's easy second choice. And in politics, you just about never get your first choice. And so the Republicans killed this bill. Without their cover, the Democrats couldn't save it, because politically, they couldn't take ownership of it.
It's easy enough to imagine a society running atop a stable economy even when it has an unhealthy politics. And it's simple enough to see how an unstable economy can be calmed through concerted action by an effective political structure. But an economy in chaos and a political system in paralysis? What happens then?"

Good question. Our dysfunctional politics places some good options off the table, makes others much more difficult to implement than they would be otherwise, and prevents us from adopting those decent options that remain to us. Consider, for instance, Brad DeLong's suggestion that we "go for the Swedish plan." I think that if we can't get a bill passed this week, we should do exactly that. But it would be a lot harder to implement here than it would there, and not just because our problems are much larger, and in certain ways more complicated.

More below the fold.

Here's a brief description of what Sweden did:
"As in the US, the Swedish financial crisis was also preceded by a property bubble, which was pricked by a rise in real interest rates. Severe stress in the financial system and the economy were to follow. In each of the three years 1991, 1992 and 1993 Swedish gross domestic product fell in real terms, at an accumulated rate of about 5 per cent.
In response, the Swedish government set up an agency to recapitalise the financial sector. Bank shareholders were not compensated. But the Swedish government did not bail out all banks, only a subset. They used a microeconomic model to determine which of the banks had a chance to survive, and which did not. Those that did not were liquidated or merged. And those that were bailed out had to write off their bad debts first. All depositors were covered by an explicit government promise of compensation. The goal was to minimise the cost to the taxpayer, and it succeeded. It turned out as one of history's most successful financial system bail-outs."

Leave aside the difficulty of getting something like this through a Congress significant numbers of whose members think that any intervention by the government would be the first step on the Road to Serfdom, and many more of whom, including some Democrats, would get very nervous about intervention on this scale. Just focus on one piece of this plan: "They used a microeconomic model to determine which of the banks had a chance to survive, and which did not. Those that did not were liquidated or merged."

The Swedes, that is, entrusted to their government the task of deciding which banks should be saved and which should be allowed to go under. Imagine what would happen if we tried that here. Hordes of lobbyists would appear, begging for special favors for their banks. The temptation for various officials to intervene in the process would be enormous. Even if they resisted that temptation, all sorts of people would probably assume that various decisions about which banks to let fail and which to bail out had been made on political grounds. Some commentators who made this case would be bought and paid for, but others would be either political opponents of whoever was in charge, or people who just assume that government officials are corrupt by definition.

Things would be all the more difficult because we would be very unlikely to get the kind of bipartisan cooperation that the Swedes had. Carl Bildt, who was Prime Minister at the time, believes that this was crucial:
"What is clear in both cases is that a rescue plan is not possible without achieving bipartisan consensus, which is indispensable for regaining confidence in the markets.
We were able to achieve this in Sweden. Consensus lasted throughout the whole process of restructuring the banking system. We never faced demands for going back to the heavy regulated markets of the past or for permanent state involvement in managing the financial sector. On the contrary, due to an organized and well-managed restructuring, it was possible to preserve the advantages of the deregulation of the 1980s, and, when the market conditions made it possible, privatize the banks as well as the credit stocks."

Note that the reason Bildt mentions demands for heavily regulated markets, etc., is that the opposition in this case was the Social Democrats, who would have made just those sorts of demands had they tried to use all their bargaining power to extract concessions. Compare that to House Republicans' attempts to use the present crisis to force further cuts in the capital gains tax, and ask yourselves just how likely it is that they would conduct themselves like grown-ups if we tried to do what Sweden did.

Stefan Ingves, now a Director of Sweden's Central Bank, and Director General of the Swedish Bank Support Authority during the crisis, adds:
"A very basic issue for the success of any systemic bank restructuring is the ability to get political decision makers to recognize that there is a problem, that the problem is severe, that it requires quick and resolute actions, and that the problems largely are technical rather than political in nature. How lucky we were in the Nordic countries to have governments able to make tough decisions and leaving most of the implementation to a group of civil servants (statstjansteman) and technical experts. In other countries, vested bank owner and borrower interests sabotage such actions through political interference, corruption and intimidation of courts and officials, etc. Necessary political decisions such as loss sharing and the allocation of public support funds are hard to come by, even in cases where the governments have the financial capacity to provide the resources. It is much easier to do nothing and wish the problems away."
How lucky they were, indeed.

It is not impossible to get political decision-makers who can come together in crises, evaluate their options clearly, and act. It just takes a citizenry who insist on being represented by adults, media who actually inform them, and politicians who do not drive them to cynicism by abusing their trust.

Until then, though, a lot of good options will be much, much harder to implement than they would be otherwise. The Swedish model is one of them.

http://www.washingtonmonthly.com/archives/individual/2008_09/014964.php
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I'm still for bank take overs by the federal government and would not shed a tear if the feds never re-privatized them.

weslinder · Oct 1, 2008

Americans for Prosperity's Plan:

http://article.nationalreview.com/?q=NDg1MTQ4ODc1ZWEzNjcyNjFiYWQyZDM3MTlkMzIwNjk=

Rescuing the Rescue Plan
Why not fund it with tax-advantaged private funds?

By Phil Kerpen

The surprising congressional defeat of the Treasury’s bailout plan triggered one of the worst stock market days in history, destroying trillions of dollars in shareholder wealth. The narrative that carried the day was that ordinary taxpayers shouldn’t pick up the tab for the excesses of Wall Street. But the half of American households that own stock may be surprised to see how much inaction costs when they read their next retirement-account statement, due soon with the third-quarter ending today.

Most members of Congress understand the gravity of the current seize-up in credit markets, but many bowed to political pressure from back home and voted against the rescue measure. Fortunately there is a solution that can solve both the political problem of putting taxpayer dollars at risk while getting credit flowing again and soothing the stock markets: Fund the rescue plan with tax-advantaged private funds.

Republicans already have signaled that the addition of tax-relief provisions to the rescue bill will bring more votes to the table — easily more than the 12 votes by which the original plan failed. Democrats, however, are sure to balk at tax cuts that bear only a limited connection to the current crisis. Tax cuts here would be seen as political opportunism, no different from the so-called affordable-housing giveaways to liberal political groups and union proxy provisions that some Democrats tried to hitch to the original bailout bill.

But the key to solving this problem is to direct the tax relief at the purchase of troubled assets.

A Treasury facility could be set up to operate exactly as suggested by the original Paulson plan. As such, it would buy troubled assets to provide markets liquidity and serve a price-discovery function. However, instead of funding the facility by selling Treasury bills that would impose a debt on future taxpayers, some or all of the fund could be constructed of capital that is voluntarily committed by private entities.

And here’s the tax-cut sweetener: All funds invested in the facility for a five-year holding-period would be tax-free, exempt from the capital-gains tax, the corporate tax, the death tax, the repatriation tax, and any other tax that would otherwise apply.

Based on the number of commentators who are convinced the government will make money on this deal, the private capital would pour in. Billionaire investor Mark Cuban suggests that the new Treasury facility trade on a stock exchange as an exchange-traded fund. Cuban says that he and many others would be interested in such an investment.

The tax-exemption also would boost general investor interest by raising the after-tax rate of return of the rescue facility. With asset prices as low as they are, the Treasury facility would be a pretty good bet. This concept could even be taken a step further: Private entities could be authorized to establish in accordance with the rules for purchasing distressed assets, qualifying them for the new mega-tax exemptions and allowing them to compete with the Treasury-run rescue facility.

This solution should appeal to both the Republican and Democratic members of the House who voted no on the original rescue legislation. The major concern of these politicians has been the unpopularity of committing taxpayer dollars to an investment in distressed assets. But this new option addresses that concern by allowing the Treasury facility and its competitors to be funded by investors who see the value in purchasing these assets, all while reducing or eliminating the need for taxpayer dollars.

This compromise approach could be up and running rapidly using conventional government finance procedures, and private investment could be brought in as expeditiously as possible. And since this approach does carry the risk of creating a new quasi-government entity — along the lines of the government-sponsored enterprises that helped create the problem — it should carry a sunset date.

With the crisis spreading from the credit markets to the stock markets to Main Street, the decision to vote no may prove to do more political harm than good. But this is a way out that can both pass Congress and solve the problem, all while reducing the downside risks for taxpayers.

— Phil Kerpen is policy director for Americans for Prosperity.
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rhadamanthus · Oct 2, 2008

And now for something completely different:

Michael Moore's Plan:

Friends,
The richest 400 Americans -- that's right, just four hundred people -- own MORE than the bottom 150 million Americans combined. 400 rich Americans have got more stashed away than half the entire country! Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion -- the same amount that they are now demanding we give to them for the "bailout." Why don't they just spend the money they made under Bush to bail themselves out? They'd still have nearly a trillion dollars left over to spread amongst themselves!
Of course, they are not going to do that -- at least not voluntarily. George W. Bush was handed a $127 billion surplus when Bill Clinton left office. Because that money was OUR money and not his, he did what the rich prefer to do -- spend it and never look back. Now we have a $9.5 trillion debt. Why on earth would we even think of giving these robber barons any more of our money?
I would like to propose my own bailout plan. My suggestions, listed below, are predicated on the singular and simple belief that the rich must pull themselves up by their own platinum bootstraps. Sorry, fellows, but you drilled it into our heads one too many times: There... is... no... free... lunch. And thank you for encouraging us to hate people on welfare! So, there will be no handouts from us to you. The Senate, tonight, is going to try to rush their version of a "bailout" bill to a vote. They must be stopped. We did it on Monday with the House, and we can do it again today with the Senate.
It is clear, though, that we cannot simply keep protesting without proposing exactly what it is we think Congress should do. So, after consulting with a number of people smarter than Phil Gramm, here is my proposal, now known as "Mike's Rescue Plan." It has 10 simple, straightforward points. They are:

1. APPOINT A SPECIAL PROSECUTOR TO CRIMINALLY INDICT ANYONE ON WALL STREET WHO KNOWINGLY CONTRIBUTED TO THIS COLLAPSE. Before any new money is expended, Congress must commit, by resolution, to criminally prosecute anyone who had anything to do with the attempted sacking of our economy. This means that anyone who committed insider trading, securities fraud or any action that helped bring about this collapse must go to jail. This Congress must call for a Special Prosecutor who will vigorously go after everyone who created the mess, and anyone else who attempts to scam the public in the future.

2. THE RICH MUST PAY FOR THEIR OWN BAILOUT. They may have to live in 5 houses instead of 7. They may have to drive 9 cars instead of 13. The chef for their mini-terriers may have to be reassigned. But there is no way in hell, after forcing family incomes to go down more than $2,000 dollars during the Bush years, that working people and the middle class are going to fork over one dime to underwrite the next yacht purchase.
If they truly need the $700 billion they say they need, well, here is an easy way they can raise it:
a) Every couple who makes over a million dollars a year and every single taxpayer who makes over $500,000 a year will pay a 10% surcharge tax for five years. (It's the Senator Sanders plan. He's like Colonel Sanders, only he's out to fry the right chickens.) That means the rich will still be paying less income tax than when Carter was president. This will raise a total of $300 billion.

b) Like nearly every other democracy, charge a 0.25% tax on every stock transaction. This will raise more than $200 billion in a year.

c) Because every stockholder is a patriotic American, stockholders will forgo receiving a dividend check for one quarter and instead this money will go the treasury to help pay for the bailout.

d) 25% of major U.S. corporations currently pay NO federal income tax. Federal corporate tax revenues currently amount to 1.7% of the GDP compared to 5% in the 1950s. If we raise the corporate income tax back to the level of the 1950s, that gives us an extra $500 billion.
All of this combined should be enough to end the calamity. The rich will get to keep their mansions and their servants, and our United States government ("COUNTRY FIRST!") will have a little leftover to repair some roads, bridges and schools.

3. BAIL OUT THE PEOPLE LOSING THEIR HOMES, NOT THE PEOPLE WHO WILL BUILD AN EIGHTH HOME. There are 1.3 million homes in foreclosure right now. That is what is at the heart of this problem. So instead of giving the money to the banks as a gift, pay down each of these mortgages by $100,000. Force the banks to renegotiate the mortgage so the homeowner can pay on its current value. To insure that this help does no go to speculators and those who have tried to make money by flipping houses, this bailout is only for people's primary residence. And in return for the $100K paydown on the existing mortgage, the government gets to share in the holding of the mortgage so that it can get some of its money back. Thus, the total initial cost of fixing the mortgage crisis at its roots (instead of with the greedy lenders) is $150 billion, not $700 billion.
And let's set the record straight. People who have defaulted on their mortgages are not "bad risks." They are our fellow Americans, and all they wanted was what we all want and most of us still get: a home to call their own. But during the Bush years, millions of them lost the decent paying jobs they had. Six million fell into poverty. Seven million lost their health insurance. And every one of them saw their real wages go down by $2,000. Those who dare to look down on these Americans who got hit with one bad break after another should be ashamed. We are a better, stronger, safer and happier society when all of our citizens can afford to live in a home that they own.

4. IF YOUR BANK OR COMPANY GETS ANY OF OUR MONEY IN A "BAILOUT," THEN WE OWN YOU. Sorry, that's how it's done. If the bank gives me money so I can buy a house, the bank "owns" that house until I pay it all back -- with interest. Same deal for Wall Street. Whatever money you need to stay afloat, if our government considers you a safe risk -- and necessary for the good of the country -- then you can get a loan, but we will own you. If you default, we will sell you. This is how the Swedish government did it and it worked.

5. ALL REGULATIONS MUST BE RESTORED. THE REAGAN REVOLUTION IS DEAD. This catastrophe happened because we let the fox have the keys to the henhouse. In 1999, Phil Gramm authored a bill to remove all the regulations that governed Wall Street and our banking system. The bill passed and Clinton signed it. Here's what Sen. Phil Gramm, McCain's chief economic advisor, said at the bill signing:
"In the 1930s ... it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.

"We are here today to repeal [that] because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.

"I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."
This bill must be repealed. Bill Clinton can help by leading the effort for the repeal of the Gramm bill and the reinstating of even tougher regulations regarding our financial institutions. And when they're done with that, they can restore the regulations for the airlines, the inspection of our food, the oil industry, OSHA, and every other entity that affects our daily lives. All oversight provisions for any "bailout" must have enforcement monies attached to them and criminal penalties for all offenders.

6. IF IT'S TOO BIG TO FAIL, THEN THAT MEANS IT'S TOO BIG TO EXIST. Allowing the creation of these mega-mergers and not enforcing the monopoly and anti-trust laws has allowed a number of financial institutions and corporations to become so large, the very thought of their collapse means an even bigger collapse across the entire economy. No one or two companies should have this kind of power. The so-called "economic Pearl Harbor" can't happen when you have hundreds -- thousands -- of institutions where people have their money. When you have a dozen auto companies, if one goes belly-up, we don't face a national disaster. If you have three separately-owned daily newspapers in your town, then one media company can't call all the shots (I know... What am I thinking?! Who reads a paper anymore? Sure glad all those mergers and buyouts left us with a strong and free press!). Laws must be enacted to prevent companies from being so large and dominant that with one slingshot to the eye, the giant falls and dies. And no institution should be allowed to set up money schemes that no one can understand. If you can't explain it in two sentences, you shouldn't be taking anyone's money.

7. NO EXECUTIVE SHOULD BE PAID MORE THAN 40 TIMES THEIR AVERAGE EMPLOYEE, AND NO EXECUTIVE SHOULD RECEIVE ANY KIND OF "PARACHUTE" OTHER THAN THE VERY GENEROUS SALARY HE OR SHE MADE WHILE WORKING FOR THE COMPANY. In 1980, the average American CEO made 45 times what their employees made. By 2003, they were making 254 times what their workers made. After 8 years of Bush, they now make over 400 times what their average employee makes. How this can happen at publicly held companies is beyond reason. In Britain, the average CEO makes 28 times what their average employee makes. In Japan, it's only 17 times! The last I heard, the CEO of Toyota was living the high life in Tokyo. How does he do it on so little money? Seriously, this is an outrage. We have created the mess we're in by letting the people at the top become bloated beyond belief with millions of dollars. This has to stop. Not only should no executive who receives help out of this mess profit from it, but any executive who was in charge of running his company into the ground should be fired before the company receives any help.

8. STRENGTHEN THE FDIC AND MAKE IT A MODEL FOR PROTECTING NOT ONLY PEOPLE'S SAVINGS, BUT ALSO THEIR PENSIONS AND THEIR HOMES. Obama was correct yesterday to propose expanding FDIC protection of people's savings in their banks to $250,000. But this same sort of government insurance must be given to our nation's pension funds. People should never have to worry about whether or not the money they've put away for their old age will be there. This will mean strict government oversight of companies who manage their employees' funds -- or perhaps it means that the companies will have to turn over those funds and their management to the government. People's private retirement funds must also be protected, but perhaps it's time to consider not having one's retirement invested in the casino known as the stock market. Our government should have a solemn duty to guarantee that no one who grows old in this country has to worry about ending up destitute.

9. EVERYBODY NEEDS TO TAKE A DEEP BREATH, CALM DOWN, AND NOT LET FEAR RULE THE DAY. Turn off the TV! We are not in the Second Great Depression. The sky is not falling. Pundits and politicians are lying to us so fast and furious it's hard not to be affected by all the fear mongering. Even I, yesterday, wrote to you and repeated what I heard on the news, that the Dow had the biggest one day drop in its history. Well, that's true in terms of points, but its 7% drop came nowhere close to Black Monday in 1987 when the stock market in one day lost 23% of its value. In the '80s, 3,000 banks closed, but America didn't go out of business. These institutions have always had their ups and downs and eventually it works out. It has to, because the rich do not like their wealth being disrupted! They have a vested interest in calming things down and getting back into the Jacuzzi.
As crazy as things are right now, tens of thousands of people got a car loan this week. Thousands went to the bank and got a mortgage to buy a home. Students just back to college found banks more than happy to put them into hock for the next 15 years with a student loan. Life has gone on. Not a single person has lost any of their money if it's in a bank or a treasury note or a CD. And the most amazing thing is that the American public hasn't bought the scare campaign. The citizens didn't blink, and instead told Congress to take that bailout and shove it. THAT was impressive. Why didn't the population succumb to the fright-filled warnings from their president and his cronies? Well, you can only say 'Saddam has da bomb' so many times before the people realize you're a lying sack of ****e. After eight long years, the nation is worn out and simply can't take it any longer.

10. CREATE A NATIONAL BANK, A "PEOPLE'S BANK." If we really are itching to print up a trillion dollars, instead of giving it to a few rich people, why don't we give it to ourselves? Now that we own Freddie and Fannie, why not set up a people's bank? One that can provide low-interest loans for all sorts of people who want to own a home, start a small business, go to school, come up with the cure for cancer or create the next great invention. And now that we own AIG, the country's largest insurance company, let's take the next step and provide health insurance for everyone. Medicare for all. It will save us so much money in the long run. And we won't be 12th on the life expectancy list. We'll be able to have a longer life, enjoying our government-protected pension, and living to see the day when the corporate criminals who caused so much misery are let out of prison so that we can help reacclimate them to civilian life -- a life with one nice home and a gas-free car that was invented with help from the People's Bank.
Yours,
Michael Moore
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I agree with points 1, 2, ESPECIALLY POINT 4, 5, 6, 7, and 9. On the fence about the other three.

I've waffled on this bill a few times, but I'm pretty firm now - I'll support the bailout, but only if we get an equity stake.

weslinder · Oct 2, 2008

rhadamanthus said:

I've waffled on this bill a few times, but I'm pretty firm now - I'll support the bailout, but only if we get an equity stake.
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Define we.

Not to belabor the point, but everyone suggesting that we should use the Swedish model needs to look at the consequences of the Swedish bailout. They saved the nation's credit system, but they had a two year depression.

When Georgia faced a similar bank crisis, they didn't bail any banks out, let them fail, and cut taxrates. Even with major bank failures, they only recorded 1 quarter of negative growth. Growth started again by the end of the second month after the crash.

(Now I'm not saying that either situation is similar to ours, but a lot of people are saying we should use the Swedish model. The Swedish model didn't work very well for anyone outside of the banks.)

rhadamanthus · Oct 2, 2008

weslinder said:

Define we.
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The government. Basically, stipulate that the 700BB is a loan.

Not to belabor the point, but everyone suggesting that we should use the Swedish model needs to look at the consequences of the Swedish bailout. They saved the nation's credit system, but they had a two year depression.
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Small price to pay for financial sanity. 700 billion more in taxpayer-owned defecit spending will result in way more than 2 years of depression once the shell game of american capitalism plays out.

When Georgia faced a similar bank crisis, they didn't bail any banks out, let them fail, and cut taxrates. Even with major bank failures, they only recorded 1 quarter of negative growth. Growth started again by the end of the second month after the crash.
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I am perfectly fine with this option too. Won't happen though.

DonkeyMagic · Oct 2, 2008

rhadamanthus said:

Obviously just a bunch of elitists.
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yeah, stupid elitists and there expertise on such matters. who do they think they are for actually giving their educated and superior opinions on such matters?!

weslinder · Oct 2, 2008

rhadamanthus said:

weslinder said:

Define we.
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The government.
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You're part of the government? Damn you for all of this!

SamFisher · Oct 2, 2008

weslinder said:

Georgia
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Are you talking about the country of Georgia?

They're an emerging market, transitioning from a centrally planned economy and a really terrible example to use.

Over half their labor is in the agricultural sector and their exports are mostly raw materials & ag products - not to mention that their homegrown financial sector was tiny and they're heavily subsidized by the IMF and the World Bank.

Of course bank failures didn't affect them that much, I mean just eliminating oxen and adding in tractors is enough to improve their GDP growth a few percentage points - I'm not being facetious either, that's really true.

Now, you can argue that Sweden or Japan is different from the US, and they are, but that's nowhere near as bad as a comparison that you're making and the way you're making it. The gap between a developed economy and an emerging market in terms of GDP growth is immense - hence the name "emerging market" - it's laughable for you to try to use that as an example.

rhadamanthus · Oct 2, 2008

DonkeyMagic said:

yeah, stupid elitists and there expertise on such matters. who do they think they are for actually giving their educated and superior opinions on such matters?!

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justtxyank · Oct 2, 2008

I'm all for giving all Americans $10 million and seeing what that will do for the economy.

Me and wife will love watching the country rebound while everyone thrives with their new found cash. From Banff.

Bandwagoner · Oct 2, 2008

weslinder said:

You're part of the government? Damn you for all of this!

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LOL I love how it is the .gov fault and not the idiots who bought a house much to expensive. Self responsibility.

Supermac34 · Oct 2, 2008

DaFingerWag said:

There's 350 million of us living in this country. The bailout is 700 billion. I suggest each of us receive 2 billion each instead of giving the whole amount to the fat cats. Problem solved.
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$700,000,000,000/350,000,000= $2,000

justtxyank · Oct 2, 2008

Supermac34 said:

$700,000,000,000/350,000,000= $2,000
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BOOOOOOOOOOOO Creepy Math Teachers!

Hooray, Money!

rimrocker · Oct 2, 2008

Supermac34 said:

$700,000,000,000/350,000,000= $2,000
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Those zeros are a b****.

But hey, as the man of the house, I should get the share for my wife and kids... they got beans in the cupboard and they don't need nothing new. Give me my $8,000 now dang it!

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Alternative Bail-out Ideas

JeffB Member

AGBee Member

weslinder Member

JeffB Member

weslinder Member

rhadamanthus Member

weslinder Member

rhadamanthus Member

DonkeyMagic Member Supporting Member

weslinder Member

SamFisher Member

rhadamanthus Member

justtxyank Member

Bandwagoner Member

Supermac34 President, Von Wafer Fan Club

justtxyank Member

rimrocker Member

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Supporting Member