Friday, September 25, 2009

The Financial Bailout will not Impoverish America

Last night I participated in a debate here at PSU on the subject of bailouts. The motion was that bailouts will impoverish America, and I argued against. Here are my remarks (I only had five minutes for the presentation).

Meanwhile, Daniel Gross at Slate makes some important similar points, especially that many of the bailed out banks have actually paid income back to the government, and that the expenditures actually made are very small compared with the commitments. For example,
After the failure of Lehman Bros., the Treasury Department agreed to guarantee the $3.8 trillion industry for money-market funds. In so doing, taxpayers assumed a massive liability. Managers of money-market funds were charged a tiny fee for this insurance. On Sept. 18, the government lifted the guarantee, reporting that it had collected $1.2 billion in fees without having made any payments.
This seems to be the experience with most of the bailouts. Large commitments, much smaller expenditures, programs being wound down. Emergency actions paid off, at least so far.

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