mikebrah

Bailouts: Misunderstanding the Moral Hazard

We shouldn't be offering anything for any securities.

The proper course of action would have been to set aside this $700B as a Super Liquidity Fund which would ensure that all current debt needs are met, and that liquidity is ample.

Then, leadership should have bombarded the taxpayer with this message:
"America is safe. Your money is safe. FDIC insurance will be increased to $250,000. Any solvent company that needs liquidity will have it provided via this $700B fund. This fund will ensure that orderliness is swiftly restored to the credit markets and any viable, solvent company will have all the liquidity they need. There will be some turmoil in the short term as a lot of poorly managed companies, especially banks, cease to exist. Rest assured that this will pass, and that we will be the stronger for it. I say again, both America and your money are safe."

Boom. Problem solved.

PS - If the entire economy is about to collapse, why is it that I have yet to hear from any nonfinancial Fortune 500 CEO or CFO giving their unabashed support for this plan. I'm always skeptical when the only party advocating a solution is the sole benefactor. General Electric, Caterpillar, Wal Mart... these companies all have pretty smart guys as their CFO. If the demise of the economy were imminent, I would think these very CFOs would be just as active in advocating this bailout as the Wall Streeters. But the only people I hear crying wolf are the very people this package will benefit.

These financial guys are coming across as aggressive used car salesman. "Once in a lifetime!", "Act Now!!! It Won't Last Long!!!", and just like used car salesman what they really mean is: "please take this crap off our hands for more than its worth!"