[lbo-talk] question for those opposed to the bailout

[Gar Lipow]

On Mon, Oct 6, 2008 at 9:50 AM, Doug Henwood <dhenwood at panix.com> wrote:
>
> On Oct 6, 2008, at 12:27 AM, Gar Lipow wrote:
>
>> It will really be interesting to note over the next few days whether
>> this bailout gives major institutions the confidence to start short
>> term lending again.
>
> This is not the best-designed bailout in the history of bailouts - though a
> piece in today's FT says the language is broad enough to give the Treasury
> broad discretion, and it is likely to use that discretion to pursue the
> better strategy of direct recapitalizations. But in any case, they take
> years. Judging it on the basis of the first three hours of stock trading is
> nutty.
>
> Doug

I said days, not hours. And I thought the whole argument for
supporting this rather than opposing it in favor of something better
was:

1) Something has to be done Now!Now!Now! because otherwise credit will
stay frozen.

2) This is far from perfect, but it is better than an immediate crash,
so we should not oppose.

OK, in spite of Carrol, this seemed sensible and I was willing to
admit I was wrong in opposing this truly horrible bailout.  Especially
when Jame Galbraith changed his mind and backed off from his earlier
statements opposing it.  And I'm not pronouncing it dead yet since
this is only the first working day of the week. But this was never
intended to be a complete or long term solution - only a temporary fix
to stop the bleeding. But if the bleeding isn't stopped by say
Wednesday, if we don't start seeing some short term lending (not an
increase in the stock market, but some unfreezing) of the credit
market that doesn't that weaken the argument for Now!Now!Now! ?  I
mean I presume the left reason for supporting this is partially
humanitarian (as bad as this bailout is a crash is worse, and will
make life worse for working Americans) and partly political (a crash
can lead to really bad things politically in Weimar America.).  If it
does even delay a crash, then doesn't that eliminate the point of
doing that.

This was argued on the basis of common sense, and reason. Doesn't that
imply there is some sort of Metric? If it is not the unfreezing of the
credit market, then what was it? What is your metric for success or
failure of this bailout?  And I know that no  money is actually going
out for six weeks, but I don't think results this week are an
unreasonable expectation. After all 700 billion is nowhere near the
size of the deflation that has already occurred in the bubble. The
whole point as I understood it was to increase investor confidence to
the point where short term lending would start again. If it is a
confidence game (pun intentional) then I don't see why results should
have to wait for the money to be spent.    If results that indirectly
help working people are not going to come right away, then doesn't
that weaken the argument for Now!Now!Now! ?  Again, if this is not the
metric for success what is? What result would it take for you to
declare the bailout a failure (for the vast majority of people) and
reluctant support for it a mistake? What does it have to accomplish to
be a minimal success, better than doing nothing?