Re: Madness: Bailing Out Greed in Wonderland

[David Farber <dave () farber net>]

Begin forwarded message:

From: Scott Alexander <salex () dsalex org>
Date: September 17, 2008 12:30:43 AM EDT
To: dave () farber net
Subject: Re: [IP] Madness: Bailing Out Greed in Wonderland

The Salon article, "Who deserves a taxpayer bailout?" (http://www.salon.com/tech/htww/2008/09/16/bailout_aig/ 
), is the best description I've seen of why some companies are  
considered critical and others aren't.  Based on that article, it does  
seem clear that allowing Bear Stearns to founder would have had wider  
effects including on people who didn't have reason to realize their  
investments were tied to Bear Stearns (and who stood to make nothing  
on the risky investments that were made).

Of course, what it doesn't explain is why it is considered sensible to  
privatize essential functions of our financial markets in this way.   
If things like clearing and issuing mortgages are crucial to the  
economy perhaps they should either be functions of government, of not- 
for-profit entities, or of entities with very limited business even if  
that means they provide very low returns.  Come to think of it, that  
sounds like the way that entities like the stock exchanges and banks  
were structured particularly after the Depression.  Hmmm....

Best,
Scott Alexander



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