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What kind of president will Obama be?
Message
From
20/01/2009 18:00:22
 
 
To
20/01/2009 16:02:30
John Ryan
Captain-Cooker Appreciation Society
Taumata Whakatangi ..., New Zealand
General information
Forum:
Politics
Category:
Other
Miscellaneous
Thread ID:
01374786
Message ID:
01375736
Views:
23
>Firstly, you advocate bailouts, i.e. feeding businesses from the public purse
>
>Advocate? My point is that Government behaved responsibly to preserve the financial system after business screwed it up. Government was left with "Hobson's choice" because the financial markets were failing and were about to dump all over the ordinary citizenry.
>
>I agree there is a moral hazard if failing businesses are bailed out. This is why government acted properly in demanding most of AIG's shares in exchange for loans of $120B to give AIG time to realize some of its $1T assets, the majority of which is now owned by the US Government. IMHO this should turn out to be a marvelous capitalist win for government. If people want to question, they should question why government was the only entity interested in what seems such a good deal. Where were the capitalists?
>
So where they were? Also, why government should play entrepreneural role? Was it designed by Constitution or invented on spot for the sake of common good?

>As banks call on government guarantees, government should be imposing oversight or demanding shares from them too. Banks that don't want to face those terms are welcome to rely on the normal market, meaning that they will end up being bought at a knock-down price by more sensible peers. Government *needs* to do this to reduce moral hazard and transfer damage to irresponsible business and its shareholders rather than ordinary taxpayers.
>
It seems to me that you slightly overestimate governmental wizdom. Does your model assign some place to the idea that government can harm or just mess up things, instead of helping? How do you know that particular government action will be helpful? It is a very relevant question because so far bailouts didn't cure situation, not even on sentimental level.

>Of course I perceive the frustration that market theories are trashed if government provides corporate welfare, but what other way was there for government to intervene to protect Joe Average? Having had its hand forced, government now needs to make the situation unpalatable for those who took the risks meaning financial institutions and their shareholders. In addition, with banking so crucial in modern life it seems inevitable that Government will impose regulations to protect itself and the little guy from focus on short-term profit rather than the long-term risks taken to achieve it. We may hope that future generations of managers and shareholders will exercise such thinking without being forced to, but clearly our current generation cannot be relied upon to do so.

I don't see what is exact criteria defining that government actually helps to 'Joe Average'. If this Joe pays taxes then he will pay for all these programs. That's the hard reality, while benefits are still unknown. I am sorry, but your logics in the above paragraph is filled by common place assumptions ("it seems inevitable that Government will..." or "we may hope that future generations..", etc.) We discuss very specific issue that cannot be judged on the basis that government is inherently wise or that future generations are inherently wiser and so on. Government has no divine power, but your scheme seemingly gives to it, and when divine power is firmly attached then any situation can be decided quickly: "God (i.e. government) willing".
Edward Pikman
Independent Consultant
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