Who's Bailing What?

Posted September 26, 2008

I'm starting to think that that the greedy assholes who got us into this financial crisis are the same ones who are saying "trust us, we know how to fix this, all you have to do is give us your money."

I've been trying to sort out a pretty simple question:  when the government starts cutting fat checks to financial institutions ... who is getting the money, and why?

Seriously.  I don't want to hear "it protects the integrity of the financial system" because that explains nothing.  I haven't seen any clear explanations of how this bail out works.  The media is worthless on the topic.  Every time I read an "analysis" I end up with the same question:  who's getting my money, and why?

The only concrete facts I've found are in the bailout proposal. Simply put, it authorizes the Secretary of the Treasury to buy mortgages with no strings attached and no oversight, while protecting him against any legal or administrative review. Not particularly confidence inspiring. [update: thankfully, the proposal has been amended to provide some teeth and oversight]

Following the dollars doesn't get me anywhere either. First, I pay my taxes. Second, a guy who demonstrably sucks at at fiscal policy uses his best judgement to buy bad debt from a herd of banks. Then what?

I really hope I'm missing something here, because it looks like the people who caused this entire crisis are still in the pilot's seat, are still making a grip of cash, and are being relieved of the problems they created, all at my expense. I don't see any incentive for reform in the private sector, and I don't see any incentive for the government decision makers to behave responsibly.

To be clear, I'm not trying to be a negative nelly, and I really don't have a problem with paying the money.  If my share of the $700B helps prevent us from returning to a financial stone age and a banking monopoly, I'm all for it.  I just want to have some confidence that there are sound economic principals behind the actions, that there is a reasonable system of checks and balances to help protect against further abuse, and that the dickheads who got us into this mess aren't buying new yachts.

I hope my economic angst can be soothed by the collective intelligence of the Internet. Or, more likely, one of my friends who works in the financial sector and has an educated opinion on the matter.

Who's getting the money, and why?

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