<< Where did the money go?

2008 > September

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Rescuing Wall Street ::

The Treasury wants to “invest” $700 billion in securities for which there is no market (a euphemism for “quite possibly worthless”) in order to bail out Wall Street.

Hurricane Katrina and the 1995 Kobe earthquake each caused roughly $200 billion in damage. These are the most expensive natural disasters to date.

Tonight I saw an item in the Menlo Park Almanac. It mentioned that an earthquake on the Bay Area’s Hayward Fault could cause $1.5 trillion in damage.

The Iraq War will cost $3 trillion.

If you add the costs of bailing out AIG, Frannie and Freddie with Hank Paulson’s $700B blank check we’re somewhere in the neighborhood of $1 trillion. That’s 5 Katrinas, two thirds of a catastrophic San Francisco Bay Area earthquake, or one third of an Iraq war.

I think, if we’re going to send money to Wall Street, we shouldn’t spend it on their worthless garbage. The banks have been frantically trying to raise capital for months now, by issuing stock. Why shouldn’t the taxpayers get equity in return for their capital? Issuing stock will dilute the existing shareholders and drive down the share price, properly penalizing those who profited from the excessive risk-taking that led to this mess. But it will inject capital to be lent, and isn’t that what the bailout is supposed to be accomplishing?

<< Where did the money go?

2008 > September

New TR >>

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