The problem is that if we wait for a correlation of forces in which our onyl allies are those we like, we wouuld be unabel to do anything.

One might as well refuse to support China’s bad to join the WTO, because one despises the Governor of Sichuan!

sonofsamphm1c,

No executive wanted to be bailed out, or to have Uncle Sam as their partner.

This is unbelievable.

Not only is it false on its face (in the early days of TARP, one could read regular reports of financial institutions joining up in the hope of having a better financial situation), it is false entirely (the CEO of AIG wants to have the federal government as his partner; the CEO of Citi wants to have the federal government as his partner; in the real world, “wants” means “compared to the alternatives,” not “would desire in an ideal case”).

Its easy to assign selfish motives to those opinions, but it’s also possible they simply believed a global meltdown, far far worse that so far seen, would be a calamity with severely negative consequences for the people of the world

There’s no reason to believe these are in any way contradictory sentiments.

Citi does not wish the world financial system to collapse. Citi does not want its shareholders or officers to suffer from their bad decisions. Transferring wealth from the Treasury to citi is one way of achieving both goals.

arherring,

I recognize you disagreed. However, you did not address any of the reasons I gave for my position. Rather, you oepned a new, unrelated series of arguments.

That said, you do raise an important point in your most recent comment:

I feel is the root cause of the problem, politicians feeling the pressure to ‘do something immediately’ rather than doing something that is well considered and effective, if anything at all.

The problem with this is that AIG, Citi, and the other zombies wield enormous political power. They are undead, and not extinguished, because of this political power. The window for a correlation of forces to be powerful enough to set a good example in this case is small and closing. As I wrote in the original post:

In an ideal world, we would simply pass the ‘Utilization Act of 2009,’ in which AIG, Citi, GM, Chrysler, and the rest would be turned into utilities, the common-stock zeroed-out, all contracts renegotiated, and so on. Of course, we don’t live in an ideal world. The next best thing is to so cripple the ability of these zombie utilites to operate in the free-market that they become wards of the state

Just today, Treasury announced a plan to give another Trillion to the zombies and the speculators. This is not a sign of political weakness on the part of the zombies.

Just today, a Republican senator sought a delay int he 90% tax. This is not a sign of political weakness on the part of the zombies.

The choice is not between this de facto utilitization and an ideal policy. The choice is between this de facto utilization and the survival of zombie rent-seekers.

The problem for me is that Dan’s post here is based on his own well thought analysis and the 90% tax bill presented by our fearless leaders is based entirely on populist rhetoric, and a shallow, fallacious sort at that (hi Chris Dodd!)

The method of the bill is fine but the ethos behind it is criminal. It’s a reactive measure brought about only by a political reaction to popular dissent not a proactive (ie Seerov’s crossing the I’s, T’s, or maybe reading the effing stim pack) measure. And it’s aim is punitive (get those AIG bastards!) and only conveniently (oh, and while we’re at it) preventative.

Exempt AIG bonuses (which these idiots knew about and to which this bill is, in spirit, punishment via taxation for maintenance of political “veracity”) and I’m, principally, fine with this bill.

Bush succumbed to the realities of the financial crisis. Historians will eventually give him great credit for that. It shocked me. I didn’t think he was capable of it.

The auto companies are a different matter. There is a lot of sentimentality involved. Some have offered a national security argument. I personally am not in favor of bailing out all three car companies. For national security, I can see keeping one.

No executive wanted to be bailed out, or to have Uncle Sam as their partner. They had opinions, probably fairly informed, about what their demise would entail. Its easy to assign selfish motives to those opinions, but it’s also possible they simply believed a global meltdown, far far worse that so far seen, would be a calamity with severely negative consequences for the people of the world. Obviously, Bernanke and the Federal Reserve fully agreed with them.

Before you tell me my comment is non-substantive or that I am trolling, my comment was directed at what I feel is the root cause of the problem, politicians feeling the pressure to ‘do something immediately’ rather than doing something that is well considered and effective, if anything at all. A 90% tax is one of those over-reactions they need to step away from as they admit their error. I thought this added a different viewpoint and that commentary was the appropriate venue for discussion even if (especially if) it was a disagreement. If you don’t want discussion or disagreement, turn off the commentary.

Seerov,

Excellent point. No class of beggars is as politically correct as AIG, Citi, GM, Chrysler, and the other zombie institutions. That is why they are able to convert their political power into cash and operating capital.

On higher marginal tax rates, and their hidden benefits to society…I’ve posted on that before.

The bottom line is this: Haste makes waste.

Our government was in such a hurry to prop up these institutions that they didn’t dot all the ‘i’s’ and cross all the ‘t’s’. They could have made the renegotiation of all contracts a prerequisite for receiving bailout funds (the UAW played ball), but they didn’t. They could have let the companies go into bankruptcy where those contracts may also legally be renegotiated and picked up/bought up the pieces afterward, but they didn’t. Instead, the government felt the political ‘need’ to be ‘seen’ to be doing something immediately and as a result are wasting millions and millions of tax dollars to no good effect.

This is the law of unintended consequences. It’s disgusting, but unavoidable at this point. To regain the initiative and stop over-reacting to the consequences of their hasty actions, our leaders need to admit they were wrong and screwed up (they won’t) instead of trying to justify and rectify their actions after the fact (they will, and will make it worse in the process).

http://www.nytimes.com/2009/03/23/world/europe/23saab.html?hp=&pagewanted=print

Why can’t we pull the trigger on BK for GM & Chrysler then?