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Paying off the mortgages would have been another bailout, just more diffuse from what we saw. And while the existing bailouts incentivized banks to misbehave,
by caseysoftware 9y ago
Paying off the mortgages would have been another bailout, just more diffuse from what we saw.
And while the existing bailouts incentivized banks to misbehave, paying off mortgages would have incentivized a generation (or two?) to misbehave.. and also further screwed the people who did play by the rules.
Of those two scenarios, I prefer the bank bailout.
- roenxi 9y agoIf the economic system could speak, which it cannot, a crisis would be it saying 'hold on! we're giving scarce resources to people who are not using productively'. Now there are really only two ways this can play out: 1) Organically, whoever was making the (economically) poor decisions is removed from the system by virtue of going broke. 2) The government steps in and the taxpayer settles debts. Once you enter (2) territory, which is what the US did in the '07 crisis, it really doesn't matter who you give the money to. You are still going to have economic mismanagement. It will continue unless it somehow gets so catastrophic that not even the government can settle it. Now, the US government is pretty powerful, so maybe that day will never come. But if they are going to get involved at all, why into give the money directly to the little people? They are already throwing out the principles of good economic management.
- caseysoftware 9y agoIt sounds like your reasoning is "if you're going to have your leg broken, better your left than your right!" I would have gone for the more short term painful but long term better option of letting them fail. What would have replaced it would not have been as fragile in this regard. (The replacement would have had other weaknesses.. but not these.)