Letters to the Editor
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This is just a down payment
Bear Stearns didn't get bailed out. The entire system of globally interlinked financial markets got bailed out. Capitalism got bailed out. Cheap at the price, if you ask me.
1. Why is this written in past tense? The $1 trillion+ bailout has barely begun. There was nothing on the books at Bear Stearns that's all that different than Lehman, Merrill Lynch, Morgan Stanley, and many others. Many argue that the level of leverage being used by these firms is still comparable to Bear Stearns. All of this junk will be turned over to the Fed in exchange for crisp and clean US Treasuries, and eventually the vast majority of this waste will be written off by the Fed and monetized. All of us will pay for this through inflation and the declining purchasing power of the US dollar.
2. What does this have to do with capitalism? Yes - the President loves to talk about a free market capitalist system in America, but this system system is far from it. Like other statements from this administration it would be generous to even say that has much basis in truth. The government has a monopoly over money creation, the very DNA of the economy. Legalize competing currencies, abolish interest rate control by a central bank, and then we may have a hope of seeing how capitalism operates when it's our savings and wealth on the line, and not just cash run off a printing press. This is not capitalism. It's corporatism.
... both the Clinton and Bush administrations and Congress accepted Wall Street's plea to let them proceed with a light regulatory hand, and accepted the argument that new derivative instruments, such as credit default swaps, would increase the stability of the overall financial system by spreading risk more broadly.
1. Why should we believe that this isn't "spreading the risk more broadly"? Who just wrote off tens of billions this week? Swiss and German banks. They weren't writing off bad European debt or derivatives: they have "Made in USA" written all over them.
2. Instead of focusing on innovation, how about looking at the monopoly enjoyed by the ratings agencies who enables these derivatives to be sold? They are the cheap gasoline that incentivizes Wall Street to assemble ridiculous vehicles like these in the first place. The SEC designates as Nationally Recognized Statistical Ratings Organizations only three agencies: S&P, Moody's and Fitch. All three earn their fees not from the buyer of these instruments, but the creator. I wonder how they stay in business? To make matters worse, government regulation requires that our pension funds and banks can only buy debt rated "investment grade" by these same three NRSRO's. These ratings are just a modern snake oil. And our government regulations, not the free market, both created this distorted monopoly and now mandates that it continue.