| 120 economists oppose Paulson's Proposed 700 billion bailout! | |
|---|---|
| Sep 25, 2008 01:41 |   |
 | In order to deal with the current financial crisis, Paulson, the Treasury Secretary, and Bernanke, the president of US Fed Reserve made a proposition to US Congress, hoping Congress can approve their 700 billion bailout plan. However, those economists seem dissatisfied with this proposal. About 120 economists from some Amercian universties have signed a petition to US Congress. In the petition, they strongly oppose 700 billion bailout plan. Here are their reasons No.1 The government just uses the taxpayers' money to subsidy those investors. This is unfair. It is normal that the investors take risk to make money. At the same time, they should bear the losses themselves. The taxpayers have no obligation to pay for them. No.2 The plan is ambiguous. "If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards." Meanwhile, FBI is probing Lehman Brothers, Fannie Mae, Freddie Mac and AIG. Those four companies are suspected to be involved in mortgage loan frauds. If it was true, I guess that US Congress might not pass Paulson and Bernanke's proposal. |
| Sep 25, 2008 07:33 | #1 |
| All I can think of is that if you rescue people and take the consequences of their irresponsible behaviour for them they will learn nothing and you will be the stressed and depressed one while they are off to their next irresponsible act. You will be expected (by them) to take the consequences of this next irresponsible act. Are you going to say no this time or are you going to allow it to get worse for you? I think that saying no this time and let nature take its course would be cheaper in the long run. |
| Sep 25, 2008 07:38 | #2 |
| The only thing that is certian is that this is not a black and white issue unless to take an extreme philosophic position. If you are totally 'free market' then the bailout is wrong and the points Yvonne makes are valid. In the long run, the markett will work it out, but what if the world economy collapses - wouldn't it have been pretty stupid to have done nothing. Unfortuately the self balancing of the free market may move through some extremes to get in balance, and it ignores the fact that it affects real people with real lives. So many world leaders and economists agree that there should be some government involvement. The issue then becomes what this intervention should be and how to minimise the unintended side effects such as subsidising the shareholders of those organisations. I am not interested in the details, but I believe that these can be achieved. The biggest potential problem is point 2: "the pllan is ambiguous".... unfortunately we have seen too many knee jerk reactions from the US government and I fear this will be another. Ambiguous: what a polite word! On past performance, Bush and his advisors are incapable of handling the problem properly... but still, action is needed. |
| Sep 25, 2008 18:32 | #3 |
| Action is needed. Economists don't expect economy to be on the smooth track selfishly. Continue spending is sort of self-cure seeking money in circulation. As well it's high time for FBI do something in Fraud investigation because the last turn of realeste speculation relays falls on Fannie Mae, Freddie Mac who could also take the first, second and thrid turns of speculation relays. The questions are where the profits from the first, second and third turns went and if risk assessment were conducted on the loans to the the first, second and thrid turns of the speculation relays. |
| Sep 28, 2008 11:24 | #4 |
| GUEST45113 | Could you please cite a reference? I can't find any mention of that petition by the 120 economists anywhere else. |
| Oct 5, 2008 23:04 | #5 |
| GUEST45113, here is the context. Source: http://faculty.chicagogsb.edu/ (This letter was sent to Congress on Wed Sept 24 2008 regarding the Treasury plan as outlined on that date. It does not reflect all signatories views on subesquent plans or modifications of the bill) To the Speaker of the House of Representatives and the President pro tempore of the Senate: As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan: 1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise. 2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards. 3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted. For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come. |
Post a Reply to: 120 economists oppose Paulson's Proposed 700 billion bailout!
Copyright © 1998-2024 All rights reserved.