The Bush-Pelosi Bailout

From an interview with the ex-CFO of Lehman Brothers, a major investment bank that is now out of business:

Erin Callan: Lucky to get out – Sep. 26, 2008
Did Lehman think the Fed would help it?

Yes. No one knew what it looked like for a broker-dealer this big and connected to the world economy to go bankrupt. And no one wanted to know.

Wall Street’s view of big risks has been this: if they win, they should keep the profits; if they lose: the government should pay the losses.

George Bush agrees. Nancy Pelosi agrees. The anchors at CNBC agrees, this morning warning us that buying these subprimes from investors at more than firesell prices would hurt the investment industry.

Well, relatively, yes. Everyone would like a free check for about $200 billion, give or take. Especially if you’ve run your life assuming that the government would save you.

The New York Times has an article on the Swedish bailout, which protected taxpayers and not speculators.

McCain can show his leadership be helping the Congressional Republicans hold out against socialism, and support a bail-out that does not teach bad behaviors. Obama has an opportunity to do the same thing, if he can convince the Congressional Democrats of the same thing.

This redistribution of loss from investors to citizens, if it happens, will be known by the most influential people who made it happen. To now, it has been the Bush-Pelosi plan. If McCain caves, and wins the election, it will become the Bush-McCain bailout. If the Democrats and Bush pass this over Republican objections, it will be the Bush-Obama bailout.