Sunday, November 29, 2009

Leftists Uncomfortable With Their Pro-Bailout Positions

Robert Reich (former Clinton Labor Secretary turned Obama supporter) is shocked that Wall Street bankers have used bailout money from the government to enrich themselves.

As if any sane observer expected them to do otherwise....

As for Reich's specific proposals to regain some of that money, well his proposal to let homeowners go to a bankruptcy judge and have them modify the mortgage is too vague too comment on,

As for repealing the repeal of "the Glass-Steagal act ", it should again be noted that no institution that were affected by that repeal had any disproportionate involvement with subprime mortgages. Instead, the institutions that were most involved in the debacle were insurance company AIG, mortgage institutions Fannie Mae and Freddie Mac and pure investment banks Bear Stearns and Lehman Brothers (and for that matter Goldman Sachs).

As for his third proposal of clawing back the $13 billion that Goldman Sachs gained from the government bailout of AIG, that's fine with me. But that would of course increase risk premiums again and undo much of the risk premium reducing effects that the bailouts intended to achieve.

Leftists like Robert Reich and Paul Krugman are obviously uncomfortable knowing that the bailouts they favored benefits rich but incompetent Wall Street bankers that in a pure free market economy would have gone bankrupt. But that hasn't caused them to disavow that pro-bailout position. Instead, they propose symbolic measures which will do little to impoverish rich Wall Street bankers, but will instead undo much of the desired effects of the bailouts and also create other negative effects.