September 19, 2008

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein

Like John, economics are just not my forte. I took it at University, got decent (though not great) grades and found the whole subject stultifyingly boring. Part of my disinterest had to be due to the fact that I took my economics classes in the 80s (the "greed is good" era) by a bunch of Chicago School-types who carried dog-eared copies of Rand with them everywhere they went. Their whole economic outlook struck me as so fundamentally selfish and unfair that I had a hard time believing that anyone who wasn't a multi-millionaire or CEO would buy into it. Truly, one only needs travel to from countries with huge income disparities to ones with socialized democracies with market restrictions to see that the exalted "Free Market" and trickle-down policies have never, EVER worked anywhere but in theory.

But despite my tendency to glaze over at the discussion of economic issues, I do have a great deal of common sense. And right now, that sense is tingling all over that this country is just staving off market collapse for another few months with the talk of bailouts. Not that I'm opposed to bailouts in general; I recognize that the alternative would be disastrous. But to hand Henry Paulson -- the man who either didn't see or didn't care to deal with this financial crisis (which we predicted more than a year ago) ahead of time --a blank check and demand no accounting, no transparency, nothing... is literally economic insanity--doing the same thing that got us in trouble the first time and hoping for a different result. Don't believe me? Paulson said today that taking away CEOs' "golden parachutes" as part of the bailout process was a "poison pill." How's that for fixing the economy?

Paul Krugman says "No deal." And Dean Baker at TPM lists what should be the Progressive conditions for a bailout:

1) Combating asset bubbles must be one of the Fed's key responsibilities.

2) The government should impose a modest financial transactions tax, comparable to the one in the United Kingdom. This can both restrain excessive trading and raise more than $100 billion a year in revenue.

3) Regulatory agencies should require that potentially tradable assets (e.g. credit default swaps) actually be traded on exchanges.

4) There should be strict limits on leverage for all regulated financial institutions.

5) Fannie and Freddie should remain fully public institutions, returning them to a status comparable to Fannie's prior to its privatization in 1968.

6) The Fed should be restructured so that all the key decision makers (e.g. the open market committee) are appointed by democratically elected officials. Its responsibility is to manage the economy in the interest of the general public, not the financial sector.


Hear that, Nancy and Harry? No more more blank checks. Anything less is insane.

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