Do we really need this bailout?

"Here's the thing. The plan Treasury secretary Hank Paulson and Federal Reserve chairman Ben Bernanke spent all morning and early afternoon talking about is meant to prevent all those awful Main Street things from happening."

The problem that people have with this prevention plan is that we have no indication it will work. I suggest an examination of the Norwegian bail-out is in order. I still think we are in for economic dislocation no matter what we do. It seems we are getting closer to the Japanese model where we hide and obfuscate as opposed to just letting all the dirty laundry air and we go through a decade or more of slow-growth and rebuilding.

So what you are saying is that Mr. Johnston is exactly right. We haven't seen business credit dry up.

You predict that the Treasury plan will stop the market crash, but you forgot to apply the same skepticism you applied to Mr. Johnston.

Why?

The plan is not guaranteed to work. There is no guarantee that the Treasury will not come back with plan II asking for another massive sum of money. And for all the money offered, both the Fed and Treasury are arguing that no punitive measures should be applied.

In the end, taxpayers may have to pay multiple times to save bankers from their egregious mistakes, and you only facilitate this by applying cheap skepticism towards critics of the plan.

"There's a lot I could respond to, but for the time being let's bracket the fact that in the run-up to the Iraq war we didn't sit glued to our TV screens as the Dow Industrials dropped 400 points in a day or watch our neighbors put all their furniture on the front lawn as the sheriff came to seize their house."

Fair enough. But Paulson and Bernanke today didn't exactly exude confidence that their plan would work. So why couldn't we make a less precipitous commitment (a smaller tranche now than $700 billion)and buy time to figure out the true extent of the problem and the optimum way of solving it?

CHARGE OF THE TARP BRIGADE

(Charge of the Light Brigade, Alfred Lord Tennyson)

(Modified by WilliamBanzai7)

Half a trillion, half a trillion,
Give or take 200 billion, onward!
All in the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.
"Forward, the TARP Brigade!
"Charge for the ABS Credit Default Swaps!" he said:
Into the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.

"Forward, the TARP Brigade!"
Was there a politician dismay'd?
Not tho' the Congress knew
Some guy named Hank had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.

CDOs to right of them,
CDSs to left of them,
AIG and the GSEs in front of them
Volley'd and thunder'd;
Storm'd at with Wall Street shot and shell,
Boldly that load of Federal largesse rode and well,
Into the jaws of Balance Sheet Death,
Into the mouth of Hell
Rode the seven hundred billion.

Flash'd all the workout sabres bare,
Flash'd as they turn'd in air,
Sabring the losses there,
Charging an army of tawdry bankers, accountants, and shysters, while
All the world wonder'd:
Plunged in the seedy subprime-smoke
Right into the red numbers they broke;
Lehman and Bear Stearns
Spared from the sabre stroke
Shatter'd and sunder'd.
Then they rode back, but not
Not the seven hundred billion.

CDOs to right of them,
CDSs to left of them,
Fat Wall Street workout advisory fees behind them,
Volley'd and thunder'd;
Storm'd at with derivative losses, asset backed shot and shell,
While level 3 zeros fell,
They that had fought so well
Came thro' the jaws of Balance Sheet Death
Back from the mouth of insolvency Hell,
All that was left of it?
Nothing left of seven hundred billion!

When can its glory fade?
O the wild loss charges!
All the world wondered.
Honor the huge expenditures they made,
Honor the TARP Brigade,
Noble seven hundred billion taxpayer dollars.

(TARP--Troubled Asset Relief Plan of 2008)

http://williambanzai7.blogspot.com/

Again Barbara, you are showing your bias.

In no way did Felix Salmon "go to town" on Johnston. He answered his questions, and many of the answers were: "Yes, you are right."

Again, you frame the response as if Johnston was wrong, but he was largely right.

Your only perpetuating the pathetic cycle by attacking critics of the Hanky Panky plan.

I think there's a much fairer way to say that. Johnston is looking around for evidence of credit drying up. Here, and elsewhere, is offered evidence that High Finance credit is drying up. Johnston does not readily see evidence of more prosaic forms credit drying up. Part of his question would seem to be an encouragement to connect what is happening in High Finance with what is or might (w/ linkages) happen with Low Finance. Yes, his examples seem a bit pedantic - but, in some real way, that's the world of Low Finance occupied by many to most Americans. To suggest these Low Finance questions are naive because High Finance is hurting is to skip, I think, over a fair chunk of Johnston's point.