Although I believe that the purchase of the debt that faltering companies have stupidly incurred will indeed help the liquidity problems of the financial markets -- and help stabilize the American economy -- it's looking more and more like the plan is a bum rap for US taxpayers. I've seen no signs that taking the bad debt from these companies will come with any strings... none at all. It is a "get out of jail free" card and that's it. And you and I are paying for it. No thanks.
This may be necessary, but it needs to be packaged with two things. First, the debt itself needs to be purchased at prices reasonably close to its actual value. The government shouldn't get slagged on this. Second, it must come with heavy, transformative regulation of Wall Street. The problems we are encountering had their foundations placed under Ronald Reagan, their walls framed under Bush One, and their roofs built under Bill Clinton. Bush Two and John McCain's own Phil Gramm knocked the whole house of cards down right on our heads. We can't simply let Wall Street start fresh or I guarantee that we'll be having this conversation once again in a decade or two, perhaps less. We need deep reforms, tight controls, and draconain penalties to guard the financial sectors of the Amerian economic system... or else.
21 September 2008
Update: Credo Action has an on-line petition going to tell Congress not to give away the store on this issue. You can find its statement of principles, as well as sign it, here.
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