Monday, February 2, 2009

Krugman: "Bailouts for Bunglers"

Some of the highlights:
“Say I’m a banker and I created $30 million. I should get a part of that,” one banker told The New York Times. And if you’re a banker and you destroyed $30 billion? Uncle Sam to the rescue!


We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.
Read the rest here. Obama's verbal scolding of the 'excessive' bonuses of Bank executives (whose 'private' institutions were recently injected with tens of billions of taxpayer money) seems to have been little more than an attempt to prepare the groundwork for a new round of bailouts (rather than nationalizations) of large banks on the verge of collapse. The first line of Krugman's op/ed is painfully clear about what's happening: If you waste immense quantities of someone else's money, according to logic of the Obama Administration you get a check for billions more dollars (preceded, of course, by a brief verbal chiding from the President).

Normally when a bank is in need of capital they sell stock to investors in return for ownership shares in the returns.
But apparently this isn't how it should work if taxpayers are the ones providing the capital. Bank owners should get to keep all of that money, says Geithner, because to demand joint ownership would mean, *gasp* that the banks would be (in part) publicly owned. According to Geithner, “we have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system.” But who is "we"? I imagine that the current owners of BoA, Chase, et. al would love to "preserve that system" (i.e. would love to continue to receive gifts (ungodly sums of money) from the Federal Government with no conditions that they relinquish control/management or any of the potential returns from the gifts they've recieved).

But what on earth, at this point, is private about these institutions? If having private ownesrhip and private shareholders, as such, is all that the Administration cares about then why not keep public funds and institutions quarantined from them in order to maintain the sacred aura of 'privateness' preserved in these shining beacons of 'free' market glory? Because the collapse of these financial institutions will cause widespread public suffering for many millions of people whose jobs, incomes, health, savings, etc depend on the health of these financial behemoths. So, any Obama or Bush administration advocate of bailouts will tell you, the motivation to bailout these huge banks has to do with (at bottom) supposedly 'public' concerns to preserve the livlihood, welfare, incomes, savings, health of millions of Americans who have no direct involvement or connection to the financial sector or these institutions.

But, any sane person would ask, why then all the bullshit rhetoric about 'preserving private ownership'?

I say nationalize them, expropriate all company holdings, and offer the newly unemployed executives entry-level jobs (i.e. teller, cashier) in the new public institution to be erected on the ashes of their private racket.

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