The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

And why does every commentator seem to assume that this bail-out is a Good Thing that we all must work towards?

Why can even _Mother_Jones_ not come up with anything more progressive than the centrist Democratic strategy?

It's time, once again, for the far-left to rescue capitalism from the clutches of the business leaders.

And why does every commentator seem to assume that this bail-out is a Good Thing that we all must work towards?

Because the media is nothing more than a willing tool of the politicians.

Did you think they worked for US??

Let It Fail! Let It Fail!

The purpose of this "bailout" is to keep entrepreneurs from creating new financial institutions that would take the place of the current criminal enterprises. Nothing in this "bailout" is going save my job, my house, or my business. Secretary Paulson has already told us such in Congressional hearings.

Prominent Democrats ran Fannie Mae, the same government-sponsored enterprise (GSE) that donated campaign cash to top Democrats. And one of Fannie Mae’s main defenders in the House - Rep. Barney Frank, D-Mass., a recipient of more than $40,000 in campaign donations from Fannie since 1989 - was once romantically involved with a Fannie Mae executive.

The media coverage of Frank’s coziness with Fannie Mae and his pro-Fannie Mae stances has been lacking. Of the eight appearances Frank made on the three broadcasts networks between Jan. 1, 2008, and Sept. 21, 2008, none of his comments dealt with the potential conflicts of interest.

Frank has argued that family life “should be fair game for campaign discussion,” wrote the Associated Press on Sept. 2. The comment was in reference to GOP vice presidential nominee Sarah Palin and her pregnant daughter. “They’re the ones that made an issue of her family,” the Massachusetts Democrat said to the AP.

Historically, there was One government that recognized that bold steps were called for when their economy was teetering.

From Saving Capitalism from the Capitalists
by Raghuram G. Rajan and Luigi Zingales, p 213. "Following a pattern it had set in earlier bailouts of smaller banks, the government set up a holding company, which it financed together with the central bank. This company acquired all the corporate shares held in the portfolios of the banks at the higher historical, not current prices. thus, the government not only provided liquidity to the banking system, but it also absorbed part of its losses. It also became the largest shareholder in a number of firms. Many of the industrial firms thus acquired were themselves on the verge of failing and benefited not just from the rescue of their banks but also from the direct infusion of public money..."

Doesn't that make pretty good sense?

Don't you think it's a plan our own government should make use of?

In case you're wondering:

The bold bailout was by Benito Mussolini. The results were as corrupt and as anti-competitive as you could probably imagine."