The Bailout Plan Benefits Incompetents, But Not Taxpapers

Lots of quotes and analogies being thrown around to describe the current crisis and the proposed bailout plan, I figure it would be remiss of me to “join the crowd” and not offer my take:

In my view the current bailout plan is akin to asking the victims of car theft to purchase cars for the thieves, pay for their insurance and a year’s worth of gas, so that the they can be spared the personal, financial and daily life disruption of future thefts. “If you buy the car thieves cars and give them money, they won’t have to steal yours and everyone will be better off”.

Now the above sounds like a ridiculous notion but it is in fact, very similar to what we’re being asked to do with the bailout plan: give our money to the criminals who have destroyed the economy, so that they’ll be better able to function and the larger economy will be better off.

At the end of the day no sane person disputes that something needs to be done and that a stronger economy is everyone’s best interest, what many (like myself) have a problem with is that:

It’s the wrong solution: focusing on bad debt securities instead of overleveraged and undercapitalized banks; if you want to cure disease you need to treat the cause not the symptoms.

The lack of penalties : apparently no one in Washington has the courage to propose a solution that is aimed at protecting the economy and the average citizen, while punishing (severely) those who caused the crisis. Remember it’s not exactly difficult to shore up the banking system whilst simultaneously dropping the hammer on those who caused the crisis.

It’s not the mere idea of the bailout it’s the message behind this one and the way in which it’s being presented to us:

“protect yourselves and the economy by using your money to take on the risk for the mistakes of Wall St”

as opposed to:

“Wall St has put you at risk so we’re going to make these investments in Main St. to help you weather the storm, and while we do have to help the banks we’re going to punish them severely for both causing the problem and needing taxpayer help. Finally we’re going to funnel direct benefits to the taxpayer from the banks that receive help, whether it’s a one time tax refund, cheaper loans, etc, etc”.

I have zero problems with the idea that the Government is going to have to help the banks for the good of the company, I DO have a problem with Washington’s lack of intelligence with respect to the nature of the solution, and their lack of courage with respect to punishing Wall St., showing respect for the taxpayer and the solution’s overall execution.

Don’t even get me started on the fact that the plan is being credited as being capable of affecting things it will have little to no influence over, E.g. housing prices, consumer spending and job creation… just to name a few.

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