The NYT writes up Bailout 2.0 here.
I have to admit, I feel like a sucker. It's not that I've come to the conclusion that a bailout was a bad idea, but rather it's that I believed that they would do what they said they would do. Paulson is now basically saying he knew that he was lying when he proposed the original plan. I gave him far more credit than he deserved.
This all may yet work out. And with the Obama administration taking over, I am cautiously optimistic that it will.
But this is no way to build confidence in government. It was a bait-n-switch job, and that's inexcusable.
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One final point that I want to offer: this bailout (and the other assorted bailouts yet to come) should once and for all settle the question of whether or not there ought to be meaningful regulatory control over business enterprise. I don't mean bureaucratic red tape, but I do mean the sorts of restrictions that would have helped avoid this mess in the first place, including CAFE standards for auto manufacturers and mortgage lending regulations for the banking industry.
Similarly, we ought to have a national health care plan to help bring health care costs down so it isn't a drag on individuals and businesses, from your next door neighbor to GM.
Even though tough regulation and programs like a national health care plan might slightly slow business growth and raises taxes (respectively), by helping avoid crises like the one we face today, they actually make our economy more efficient.
There's no doubt that rigid conservative idealogues would oppose what I'm saying, prefering that government do nothing while the market "sorts things out" but the reality is that their vision will never, ever take place.
In a democracy, whenever there is a crisis like this, government will act, and that action will involve huge bailout programs. The fact that such programs will always be forthcoming means that business don't have a sufficiently powerful incentive to prevent problems like this from cropping up again. If we want to avoid these crises in the first place, the only real solution is sensible regulations designed to avoid them.
© Jed Lewison