on the “bailout”

The reactions to this week’s turmoil on Wall St. and the accompanying tumoult on Capital Hill have varied from “we must do this bailout…for the sake of the American Taxpayer”, to “We must not do this bailout, for the sake of the American taxpayer.”

The problem here is that there is a common perception that the $700 billion that the US government is going to pay will somehow go straight into the pockets of the evil bankers.  This isn’t true.  However, people have been right to react angrily to Paulson’s irrational demands of no oversight and regulation.  The fact that he has demanded $700 billion in one fell swoop, and has made it explicit he doesn’t even want court oversight of the buying up of this debt shows just how crazy the whole affair is (much less the people charged with fixing the damned thing).

In reality, this is all more or less a result of a decision made a long time ago to put the administration of our private property in the hands of people other than ourselves and other than simple savings and loan banks.  Putting investment banks into the mix, residential property became a speculative market.  That is, property became more valuable not because of demand but because of expected demand.  This results in the investment banks becoming the chief instigators of economic growth, because it is no longer growth in population or growth in manufacturing that causes land to increase in value, but instead the value that investment banks deem a piece of land to be worth.

Of course, as soon as the investment banks all stop trusting each other to value their assets accurately, property values plummet, and we find ourselves in a situation more or less like the one the US woke up to find itself in today.  And this is to say: The banks will need that $700 billion dollars, and will most likely get it.  The problem is, people will direct their rage at the banks, instead of at the Republicans, who bear the most responsibility of pushing the economy towards the unfettered market capitalism that caused this downfall in the first place.

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