The Bailout Outrage

"At the end of the day, the thing to get outraged about is not the $440 million in bonuses at AIG or the $10 million that Citigroup is spending to redesign its shrunken executive suite. These may seem like princely sums, but they are almost insignificant compared with the real outrage: the hundreds of billion dollars of taxpayer funds that have been put at risk to keep AIG and Citi from failing and taking the whole financial system down with them. Let's keep our attention on the elephant rather than the pimples on its behind."

Yes, the real issue is not the measly $1 million bonuses at AIG. It's the trillions that are spent to prop up financial companies in the name of systemic risk. But are these institutions truly systemic? We may never know, because they are not allowed to fail. That raises the question that some non-systemic institutions may be propped up, in the name of systemic risk.

"During a financial crisis, fairness is a luxury we cannot afford. " First of all, what is a financial crisis. Who decides when a recession becomes a financial crisis? It is possible that a "financial crisis" is used as a means to justify the bailout of the irresponsible. Precisely, we see that some institutions are benefiting unfairly.

"Unfortunately, the price of righteous indignation is a wave of foreclosures, a further decline in home values and billions of dollars of additional loan losses at banks that are already on government life support. Given the financial and economic hits they have already taken, that's a price that most "innocent" homeowners and taxpayers would probably prefer not to pay. "
Why are lower home prices detrimental? Lower home prices mean absolutely nothing to those with equity that are staying in their homes. The question is whether or not the government should be artificially propping up asset values such as homes that were inflated based on leverage.


http://www.washingtonpost.com/wp-dyn/content/article/2009/03/19/AR2009031903607.html?hpid%3Dtopnews&sub=AR