Thursday, October 02, 2008

I think I'm against the bailout in its current form

I think, after reading a lot of stuff, that I'm against the $700 billion bailout. Mainly because as I understand it, the plan doesn't actually tell us what Paulson is going to do with the money exactly. Presumably he'll buy mortgage-backed securities from distressed institutions. But how much will he pay for them? Market value? But if he's just going to pay market value, why do we need government intervention? Presumably he's going to pay more than the currently frozen market would. But how much more? How will that price be determined? And what will the taxpayer get in return? An equity stake? How much of an equity stake?

I do think something needs to be done, as some kinds of credit markets are seizing up. Apparently California is having trouble borrowing money right now. (I heard this on NPR on the way home.) I'd accept a smaller version of the Paulson plan, say $50 billion, to get things started, to be followed by a better thought-out bill by the new congress and president (hopefully Obama, the polls are swinging his way these days).

This panel of Princeton economists, including Paul Krugman, is a good background piece. It's over an hour, but I feel I can discuss this much more intelligently now:

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