About that Bailout
William Grosso @ October 2, 2008
Update: by far the best commentary on the bailout has been over in the Becker-Posner blog,
So, for the past week. aside from a few moments pondering tonight’s “debate”1, I’ve been pondering the bailout plan.
Followers of my facebook feed know, of course, that I think the bailout is a bad idea. Even after my lunch with Chris Yeh, who patiently explained the ways in which over-leveraged banks depend on each other’s goodwill to keep their businesses afloat, I still, fundamentally, don’t get it.
Here’s where I was on Monday
- This was a long train coming. It was completely obvious 6 to 8 years ago that the house of cards would eventually collapse. The level of irresponsibility on all sides (from the people who took loans they couldn’t possibly pay back, to the people who wrote the loans, to the mysterious ways in which the level of fraudulence was obfuscated to …. ) has been astounding for a long time.
- At the end of the day, businesses are about taking risks. I work in a startup. Each and every day, I make judgement calls that could turn out to be wrong. If I make enough wrong calls, …. game over. That’s the whole point, isn’t it? I get to try to build something truly great, and I have to deal with the consequences of failure. Why should financial houses be any different? Why is it a tragedy if they go under?
- The Chrysler bailout didn’t help the automotive industry. Hell, it didn’t even help Chrysler for very long. There’s no reason to believe that this bailout will lead to fundamental change in the financial sector and, without that, it’s hard to see this having a significant impact2.
- I see no reason whatsoever to believe this plan will do anything other than provide a brief band-aid. Maybe I’m being dense, but it seems like a we’re either wasting our time (because things will sort themselves out), or we’re prescribing a headache powder for a brain tumor.
Then came the House vote, and the “new and improved” bill.
- The level of partisan bickering before and during the vote was distressing. If it’s truly a national emergency, then McCain was right to go back to Washington and nobody, on either side of the aisle, should have been finger-pointing. I shouldn’t have heard the Republicans blaming the congress and I shouldn’t have heard the Democrats blaiming the president.
- The earmarks in the current bill are a national disgrace. At the end of the day, either it’s a national crisis, in which case everyone should be working to solve the problem, or it’s not, in which case the bill is active chicanery. Larding in extra spending on unrelated pet projects, and the fact that apparently votes for the larger bill were traded for these earmarks, is incomprehensible and negligent.
- At the end of the day, this makes me feel, more than ever, that California should secede from the United States. I told Chris this over lunch, and he shook his head ruefully, but really: this feels like an East Coast mess to me. In New York, they play weird financial games and in Washington they revel in empty words and in (Northern) California we build software. If New York screws up and Washington makes a power grab, why exactly should I care? Or, more precisely, why exactly should I care enough to support a boondoggle of this magnitude
And so, for all the above reasons, I don’t support the bill. Even though, ironically enough, it’ll help me out.
- A pointless exercise that only served to raise the question: is it a better rhetorical tactic to distort your opponent’s record or to completely ignore the questions asked by the moderator↩
- See also the famous definition of insanity↩
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