Here’s the thing: historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.
The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.
And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.
As citizens, you aren't entitled to accountability for or any benefit whatsoever from the various crimes your tax dollars are used to cover up. There's a big club. You ain't in it. Shut up and pay them.
Coming soon: As consumers, it will all be up to YOU to save the Holidays by running up your credit card balance. Shut up and do it.
Update: Senator Dodd's plan which provides for at least some protection for foreclosed homeowners, as well as a better oversight framework is slightly less crazy than just handing Wall Street $700 billion.
Upperdate: Here is Athenae's better post about who is and isn't in the big club.
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