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rockermike
Mountain climber
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Topic Author's Original Post - Jan 24, 2009 - 12:37pm PT
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The way I see it, the current bailout scheme is to take money out of the tax payers' pockets (or our children's) and give it to the shareholders of the busted banks. Or (round two), buy non-voting preferred shares which leave the same profiteers who created the problem at the reigns. Either way enormous amounts of wealth is transferred from plumbers, school teachers, junior accountants, truckers...et al., and given to the wealthy who already made a killing during the so called boom years.
The problem is - as the bankers are quick to remind us (or threaten us) - modern western civ can't survive without some institution to accumulate savings and small scale retirement related investments and allocate those financial resources in a rational way ( oh, would that America actually had savings - but that is another topic).
Are we therefore stuck being blackmailed by the captains of finance?
Only alternative IMHO is to nationalize the banking system and run it not for private profit, but for the health and stability of the real economy.
I know, I can hear the knee jerk reaction of the neo-cons; gov can't do anything right. Like the fire department (when was the last time a house was left to burn), the military (nasty guys, but good at what they do), social security and medicare (4 % admin overhead vrs 30% in private industry), the post office (45 cent letter delivery to any address in the country) etc etc.
Anyway, Sweden came to the same conclusion years ago - gotta get the crooks and their books cooking accountants out of the game...
http://www.iht.com/articles/2009/01/21/business/sweden.4-412796.php
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jstan
climber
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Jan 24, 2009 - 01:27pm PT
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The fact all of the political threads have not disappeared , as expected, following the election suggests we all have remain engaged. Very hopeful.
It seems there are an infinite number of kinds of questionable securities out there that might be termed "toxic" and "need to be removed from the system". Once we start to remove some of them the prospect of certain profit will cause the number to swell day by day. Nationalization might help cut off this particular shell game. Pushing equity holders to the side is just, I think, because they allowed CEO's to have the power to control the boards of directors, a clear conflict of interest.
As far as the mortgages that are under water inflation would solve that problem provided only that wages are able to track inflation. That is doubtful, which means the risks of the boom and bust cycle bought into by the administration when they dropped the Federal Funds rate to benefit Bush's re-election prospects in 2004, will have a much higher price than that originally contemplated.
Worst case, we are facing the possibility of Federal insolvency.
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dmalloy
Trad climber
eastside
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Jan 25, 2009 - 03:14pm PT
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again? we just nationalized 'em 3 months ago....
actually, what has been done is much worse than any nationalization (and I am, but almost any standard, a progressive). The banks made colossal mistakes; we decided to give them enough money so they did not have to suffer too much (because we believe that when they suffer, all the rest of us will, too); and then we left the same people in charge to use that money as they see fit, and to make the same mistakes again as soon as we get distracted by, say, a dirty bomb in Bangkok or an attack on South Korea by North Korea.
So anything that can be done now to try to put the banks on a better course seems like a no-brainer. Let the same regulation-hating Republicans who bear a lot of the blame for this mess squawk on about socialism and free markets, we will let progressives handle things for a few years until the conservative movement in this country comes up with some ideas that are less than 3 decades late.
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paganmonkeyboy
climber
mars...it's near nevada...
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Jan 25, 2009 - 04:49pm PT
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skip - i'd agree with you, except we also have seen that a truly free market just brings out the greedy and No Oversight isn't really an option either - these people are just crooked and will do anything they can to make more money, regardless of solvency, honesty, and other (outdated, apparently) moral concepts...
maybe we need to have some chinese justice here, where the crooked corporate people are taken out and shot ? (the ones bad enough to get caught, anyway...) maybe then we'd see some honest players...
is bernie even in jail ? justice for all, some restrictions apply...
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dmalloy
Trad climber
eastside
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Jan 25, 2009 - 08:32pm PT
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hey skip....just 'cause I'm seeing an opportunity to shed some light on where views diverge here...
I have trouble believing it is remotely possible to run 3rd millenium, currency-based world on "free-market principles". For more than 500 years, governments of a variety of compositions have created the conditions in which commerce occurs. It is beyond imagining that our world would have come as close as it has to feeding 6 billion people without constant propping up, interference, guidance and action by governments.
How would currencies work without governments to print them and stand behind them? How would banks work without "central" (government) banks to stand behind them? Governments are going to collect tax revenue in one way or another....does not the method of that collection have an enormous impact on all aspects of an economic system?
In no major economy of the world are roads built and maintained by anyone except governments - doesn't the choice of how many roads to build, and where, have a significant impact on economic activity? Without a police force to maintain order and the rule of law in societies, how would a person who as supposedly "earned" a lot of wealth hoard that wealth - would other people not just come and steal?
I think I have a pretty fair understanding of the arguments for "free market principles", but they seem based on trying to reach an impossible nirvana, close to the theoretical "perfect economy" that academics talk about. In the actual way that human life has progressed on earth, I cannot find an example where of anything close to a "free market" throughout history.
This is why I have trouble with the dogma of "free market principles" - it is applying a false construct onto an actual world.
Now this does not mean that I believe governments should be in control of all aspects of an economy or that they always do a fine job with the things that they do control. But by the same token, the financial collapse of the last few months is not the only available example where movements toward "free market principles" have, in the end, had an enormous negative impact on the lives of blameless people.
Governments screw up and have inefficiencies. Non-profit organizations screw up and have inefficiencies. For-profit companies screw up and have inefficiencies. It is beyond my understanding that intelligent people can harp on the inefficiencies of governments and completely ignore those of businesses.
Oh, that's right....we just call it "creative destruction" and move on.
So I do not agree that "with free market principles we can choose". In any social system, the only people who can "choose" anything are those with power. Free markets mean that "power" comes from "wealth", so people's choices are governed by their wealth. I am OK with that situation when thinking about people who choose between furthering their education or buying a flat-screen TV, but when I look around I see plenty of people who have the "choice" between paying their rent or their health insurance. And when it comes to that, I think "free market principles" have lost their utility.
Writ large, I believe that what our leaders in DC are grappling with right now is -
 for at least a decade, the financial system has been handing out wealth (in the form of high salaries and investment returns) at an unsustainable level; this created other unsustainable situations throughout the economy (take your pick of home prices, consumer debt, or 11-year-olds with $200 cell phones)
trying to move immediately to a sustainable system would result in massive upheaval throughout our economy, with many people suffering an inability to attain the basics of life
now, while trying to look ahead and put in place "guiding hands" that will limit unsustainable activity again in the future, leaders are trying to guide us to that new system while limiting the economic turmoil and the impact on people's lives
I think leaders of both parties and of most guiding philosophies are trying to achieve that same thing. Of course their differing opinions lead them to believe that it will take different actions to achieve that. While the general idea of a "free market" will (and should) remain an important consideration, I for one am entirely happy that those with a larger balance of power are not enthralled with the idea that "free market bad, government good".
So, I think I get where you are coming from....I just don't think it reflects reality.
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JEleazarian
Trad climber
Fresno CA
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Jan 26, 2009 - 12:00am PT
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We already nationalized banks. They're called Fannie Mae and Freddie Mac. All that accomplished was to substitute imperfect market discipline with imperfect political discipline. Jstan is absolutely right; the prospect of a bailout rewards imprudent risk taking. I doubt, however, that governmental (and necessarily political [cf. the Fed]) ownership will make the problem better.
The argument to nationalize the banks suffers from the "grass is greener fallacy." Just because the market is imperfect, it does not follow that governmental ownership will make it better. The other polar opposite agrument -- get the government completely out of the banking market -- suffers from the same defect.
The real problem with the latter proposition (no governmental interference) is that it is a straw man. Free markets assume certain governmental actions. As just a partial example, there can be no free market without governmental protection of property rights. Similarly, free markets assume competition by certain means such as price and quality, but not by others, such as assassinating competitors' employees -- or defrauding investors. Free markets need competent governments. I hope that we will focus on that, and not on political or philosophical partisanship.
As usual, rockermike, you've started an interesting thread.
John
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Jeremy Handren
climber
NV
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Jan 26, 2009 - 12:30am PT
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"Similarly, free markets assume competition by certain means such as price and quality, but not by others, such as assassinating competitors' employees -- or defrauding investors. Free markets need competent governments."
Can a "competent" government exist in a political system where money has so much influence?
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Robb
Social climber
It's like FoCo in NoCo Daddy-O!
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Jan 26, 2009 - 01:33am PT
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Why?
Aren't they messed up enough now?
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JEleazarian
Trad climber
Fresno CA
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Jan 26, 2009 - 04:27am PT
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"Can a "competent" government exist in a political system where money has so much influence?"
Yes.
John
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bachar
Gym climber
Mammoth Lakes, CA
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Jan 26, 2009 - 06:46am PT
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What is "money" ?
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jstan
climber
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Jan 26, 2009 - 12:11pm PT
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That one I can answer. Money is the stuff you don't keep in your wallet.
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JEleazarian
Trad climber
Fresno CA
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Jan 26, 2009 - 02:13pm PT
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I disagree, Rokjox. I find using my debit card and internet bill paying significantly cheaper than what it cost me to pay by check 25 years ago.
John
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Crimpergirl
Social climber
Boulder, Colorado!
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Jan 26, 2009 - 06:14pm PT
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A bit on the side, but...
Roxjox - do you really pay for a checking account? Mine is free (regardless of balance) and using my debit card is free as well. If I use the debit card in an atm that is not my bank's, I pay. But I never ever do that. So annually, I pay nothing to bank - maybe you can find the same deal too?
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