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The Great Bail-Out Debate (Friday, September 26, 2008)

So President Bush's administration has proposed a plan that would pour $700 billion into the banking and credit industry, and (with luck) prevent a further meltdown of our economy. This plan was going along smoothly, supported (with caveats) by much of Congress. Then McCain shows up, and suddenly, half the Republicans in the House are now calling for a different plan, while the Democrats are siding with Bush. How bizarre is that?

Of course, if you think about it, it isn't bizarre at all. The main problem that Republicans have with Bush's plan, is that it takes $700 billion of tax-payer money, while the Republicans want to fund it with private investments. Here's the real kick in the teeth. An investment by the government means that the People of the United States would own a large piece of these businesses that are being saved. Eventually, when everything stabilizes and life returns to normal, the value of those businesses will go up — potentially by a lot. And then the government can sell their share of those businesses back onto Wall Street, at a premium price, that will most likely pay back the tax-payers investment, and possibly even pay back a whole lot more. Also, having government ownership, means strict government oversight, making sure that CEOs aren't robbing investors blind and making risky decisions just to turn a quick profit.

The alternative, desired by the Republican opposition, for private investment would mean that companies and individuals who are already very, very wealthy, would invest their money in these big troubled businesses, in the hopes that when the businesses recover, that they get to profit hugely from their investment. Unfortunately, private investment means less oversight, and like the behaviour that got us here, puts investor pressure on the businesses to conduct risky business in an effort to boost their stock price. The Republicans are pushing for measures that would make their buddies and their campaign contributors a little extra cash — at the expense of not really solving the problem at hand.

I have no idea if the Bush administration's plan will work. I don't think any amount of investment is going to be able to correct the problems caused by greed and stupidity, at least not in the short term. But the government is dead set on applying a $700 billion piece of duct tape to the hole in the side of our Titanic economy. There are two possible outcomes... it either works, or it doesn't. No matter where the money comes from, if it doesn't work, we're screwed. If it does work, then if the money comes from the tax-payers, it will be the tax-payers who benefit, but if the money comes from private investors, then the rich get richer, and we get screwed.

Unfortunately, everything is happening so fast, and with so much panic, there's no time for Congress to spell out what they're doing, no time for the People to understand what's going on (which is why you have so many people protesting the bail out, to begin with), and no time for Congress to understand our questions and concerns, or to review ideas by people who actually have some idea of what's going on. And that's why I don't know if it will work. I can only hope that the new leadership brings some accountability to the United States, or this road will not get any easier, no matter how much money we borrow.

—Brian (9/26/2008 7:49 PM)
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