Monday, September 22, 2008

"There are better ways forward."

by Sebastian Mallaby

The more I listen to the Sunday news talk shows, and read the (web) news articles, the more it sounds like we've been here, before. The hurry placed on the Congress to approve the proposed bail out of financial institutions, without much examination or proposed changes, sounds like a another "mushroom cloud" threat and reaction. And we now know the results of that endeavor.

The Post Op-Ed columnist, Sebastian Mallaby, brings some sense into our current situation and mentions the other, more viable, alternatives that isn't getting much attention. And, puts the proper historical perspective to the proponents comparison with the clean up of the savings and loan crisis. The key segment:

Within hours of the Treasury announcement Friday, economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans. Given a fatter capital cushion, banks would have time to dispose of the bad loans in an orderly fashion. Taxpayers would be spared the experience of wandering into a bad-loan bazaar and being ripped off by every merchant.

Now, whether cooler heads will decide this one is the question. Again, we're being sold fear, and the need to act quickly, over scrutinizing what we're buying and ignoring more bad policy from an administration with a long record of proposing such.

1 comment:

  1. Paulson's bail-out proposal sounds like one last Bush administration rip-off before they all have to find new jobs. The admin wanted American homeowners who got in over their heads to sink or swim; they freely handed out the same advice to other countries. It's time they tasted some of that medicine they've patented.