September 19, 2008
Many economists seem to, generally, support the radical proposals of the past 24 hours. They all hate the idea of a bailout, but say something along the lines of, "he had no choice."
Luigi Zingales, of University of Chicago, though, says there is another, better way.
Powerful essay by Zingales. I've been asking one question all week. Are we capitalists or socialists? Seems the only time we are socialists is when it is of no benefit to the general population.
While nobody disputes the ongoing rescue efforts my thoughts have focussed on the insititutions and the individuals at these institutions that were responsible for this crisis.
I am talking about the employees and management at leading brokerage and investment banking firms.
Is there so much institutionalization that nobody could speak out against financial instruments that they knew would blow up on their face someday.
I guess the 'someday' is key because if it is not the next quarter or the next year their bonus' would be intact.
The last thing one should do is throw a blanket charge but if these 'smart' people were not so greedy they would have seen this crisis coming.
Now to the most serious part of my comments - Mr Paulson was if i recollect is a product of this industry and a very senior exec at Goldman Sachs. Is it not a Conflict of interest to involve him solely in this rescue effort.
Will he hold these firms, their key employees and decision makers for the mess - i guess not.
At the very least the upcoming regulation should focus on monitoring the ratio of risky securities a firm invests in to the assets it has to face the risk of these securities.
True socialism failed because the leaders weren't able to live up to the standards of equality throughout the society. It turned out that some had privileges. True capitalism will not exist because the leaders weren't able to live up the standards of transparency so that all parties could easily see the value of the asset. The University of Chicago paper is too purist and makes no account for human nature.
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html
Ah, so now we see that Davidson is citing all the mainstream economists, those who helped get us in this mess. How could you still credit those at the UofC, the architects of the Asian, Russian and Mexico meltdown? Ah, because they are famous for deregulation schemes that have helped meltdown other financial systems.
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