Here were my comments (heavily quoted from folks I respect):
I am against this bailout plan.
While I do believe government is equally culpable for this current situation due to its relaxation of regulation (repeal of Glass-Stiegel, investment bank exception for leverage ratios, etc.), I do not think buying assets at above market price is in any way the right solution.
You don’t solve the problem of over-leverage pouring more gas (credit) on the fire.
One of the key issues in Real Estate is one of affordability. Having assets come down to more reasonable prices in relation to income, while painful for those who bought at the top of the market, is a Good Thing for the majority and more in alignment with historical norms.
Regarding the stock market, I would rather see my 401k drop by $50k than have my families “share” (there are 5 of us) of the federal debt increase by the same. I have faith that if we maintain some semblance of a free market, my savings will recover in the long run. I don’t have same faith that the government will every pay off that debt (my children will be left with it).
The market is already hinting at the right solution:
– “People are breaking up their big deposits and CDs into $100,000 chunks covered by the FDIC. The big deposits tended to be in big banks; the chunks get distributed to local and regional banks (because there are more of them). Money is flowing but not the way Wall Street wants it to. The proposed bailout reverses the flow and pumps money back uphill to Wall Street.”
So, what should the government do?
“… Build up the Main Street defenses. We’ve already re-nationalized Freddie Mac and Fannie Mae to keep mortgages flowing. The quick move taken to stop a panic in money market funds was a good one. Make sure there is a standby appropriation for Federal Deposit Insurance. Get some massive public investment underway in thing there ought to be public investment in: the electric grid, maybe broadband, government energy efficiency, bridges and roads. Banks are not public infrastructure; they’re not where we ought to be investing public money.”
Artificially keeping prices high doesn’t end the pain from a burst bubble; it prolongs it (and shifts the pain from the ones who willingly purchased these assets at artificially high prices, to the taxpayer).
Please, if there must be a bailout, shift your support away from this ill-advised plan and towards a more thoughtful one. And do NOT fall pray to the panic of presidential politics that is trying to get you to make a decision today.
The last time congress made a rushed decision on the advice of the Administration, we ended up in an expensive, perpetual war.
Please do your due diligence.