An update on the bailout

Gordon Tullock is a smart man:

When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.

Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.

Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed last month, the Treasury Department has committed all but $60 billion. The shrinking pie – and the growing uncertainty over who qualifies – has thrown Washington’s legal and lobbying establishment into a mad scramble.

The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers – as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages.

The real lesson here is about the massive fiscal stimulus on its way.  Beware, and don’t be tricked by people simply postulating how the money "should" be spent.

Comments

With the amount of cash we have tossed out so far, one would wonder if we would be just better off with the recession

The real lesson here is about the massive fiscal stimulus on its way. Beware, and don't be tricked by people simply postulating how the money "should" be spent.

Like if someone tells us it "should" be spent propping up local government spending?

In the simple Keynesian models, an aggregate demand shock is fixed with fiscal or monetary stimulus. Have public choice writers investigated the success of the fiscal mechanism very closely? It seems like this is all contingent, not on the Keynesian model being right, but on government being able to actually get the money into the economy. Maybe this is another reason why we should support more of the automatic stabilizers, like extending unemployment compensation and food stamp vouchers. That money, at the very least, goes to people who have a very high propensity to spend out of current income. Trying to get it out in other ways invites worse forms of rent-seeking it seems like. Is that the case, though? Have applied public choice writers done much on this?

"Will state-supporting intellectuals continue to ignore the perverse incentives created by interventionism?"

In one word: Yes.

“ was telling a friend, "this must have been how the Politburo felt,"

Mason, Treasury’s liaison to the business community & first port-of-call for lobbyists.

The quote of the week was yesterday in the WSJ's article on Amex'x app to become a bank holding outfit for bailout purposes. Someone said, (roughly) that "Everyone wants to become a bank to get government money."

So if you want a piece of the action, call 1-800-BAILOUT, but hurry, the deadline is 5 PM Nov. 14! All sales are final!

It's not a good sign that the government bailed on a plan to buy mortgage assets and CDOs from the financial institutions. They may have discovered the true worth of the securities, rendering the capital infusion plan useless.

The one overwhelming positive is that this is happening under Bush's watch; 2 years from now when the revisionist wingnuts start crowing that this was all a liberal conspiracy to grow government there will be ample online content to shut them up.

Of course it is happening on Bush's look-the-other-way. The last eight years haven't been a straight-forward pilfering of the country's future, and this boondoggle is little different.

The best part about the situation is that we have republicans and democrats arguing about who is responsible for this. One commentator went so far as to say that this is Bush's fault. As though Bush is the devil but the rest are a bit more angelic. Where does one go mentally to buy into such delusions?

Actually lets just say that all of the crony capitalism of the past 8 years is only because of Bush. Then how do we account for Pelosi and Obama's ringing endorsement of the GM bailout? Or do we just gloss over this uncomfortable fact. Or maybe we actually try to contrive an argument to defend the indefensible. Those are my favor expositions of insane political bias.

Let the religious beliefs continue, it allows the current government in this country to continue its devolved plunge into a plutocratic corporatocracy.

How come no one talks about stabilizing the value of the dollar. Things are deflating on a massive scale. Look at whats happening with the price of gold, the most stable commodity there is:

http://goldprice.org/gold-price-history.html#10_year_gold_price

No one knows where the bottom is for anything else in the economy when no one knows what the dollar will actually be worth.

We MUST stabilize the dollar. Deflation is as bad as inflation. We've had a huge amount of inflation in the last 7 years, but letting things deflate back is NOT the solution.

More of my thoughts on the housing boom:

http://blog.reinventdemocracy.org/2008/10/falling-home-prices-and-deflation.html

Only in your warped head, Superheater. Take off the tinfoil beanie - it seems to be damaging your neurotransmitters or something.

Any truth to the rumor that Tyler and Alex have applied to have this blog declared a bank holding company?

Meter:

You are the poster child for statism as a religion.

No one does snark as well as lefties. They're also really good at cool, cutting, edge and crit.

Considering that the bailout bill gave the Treasury Secretary wide discretion in deciding where the money goes, and given that this discretion was asked for and received by the Bush Administration, doesn't the old dictum about how power and responsibility go hand in hand apply?

Which dictum? "Fool me twice"? That dictum maybe?

The argument made by people like Krugman was that the bill is better than nothing and that an incoming administration would be able to fix things up for round 2 of the bailout should it be needed.

Krugman was wrong. The bill was far worse than nothing.

People talked about Paulson's vaunted reputation. Didn't they remember Colin Powell's vaunted reputation and how that got used up getting into iraq? Fool me twice.

Everybody who was in favor of the modified bailout ought to shut up about economics and politics for a couple of years. Listen to the people who opposed it to the end, the people who haven't utterly discredited themselves. Try to figure out which of them make sense.

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