The Bailout Methodology That Had to HappenMarch 3, 2009
The government is finally about to start buying up the garbage assets that all the big banks are holding. From the WSJ, still owned by the same people who brought you When Animals Attack:
This one is going to be a public-private partnership, wherein the government will pony up a lot of the capital ($500 bil to $1 trizillion) and private investors will pick up the rest. Ideally I assume this would make a portfolio of 2,000 distressed credit-card receivables cheaper than current prices, such that someone out there would still be able to collect on enough of them to make it worthwhile.
I think this is what needed to happen all along, and for all the correct arguments about moral hazard — I met enough arrogant bankers in New York to know that they completely disregarded the idea of consequence long before this debacle — the Republican preference to let the national ship sink for the sake of principle is callous and stupid. I don’t know about you, but if I was just some working-class Detroit guy chillin’ homeless and broke in the event of a complete financial crash, I wouldn’t be telling myself, “Dude, I really showed those bankers.”
And as for tax increases to fund the spending, there’s always the Chinese and Japanese, who will keep lending us money as long as we buy their stuff and maintain a favorable exchange rate for their exports. That fact worries me more than the rest of this, but hey, one thing at a time here!