So the senate has eventually passed Bush’s rescue plan; whereby $700B of American tax payers’ money will be used by the federal government to “bailout” financial institutions. The US federal government will use this money to acquire bad assets; mostly mortgage-backed securities (MBS) that have plundered in value and sucked these financial institutions dry of cash to lend. A balance sheet nose job :)
“Advocates say the plan is crucial to government efforts to attack a credit crisis that threatens the economy and would free up banks to lend more. Opponents say it rewards bad decisions by Wall Street, puts taxpayers at risk and fails to address the real economic problems facing Americans.”
I’m not interested to take sides here, but the last time anything similar was done, it was called “nationalization.” Oh yea! It might not be as dramatic as government buying stake in the failed institutions, but it’s not loaning them either. Because the government is buying the most “toxic” portion of assets, antennas will be high and controls will definitely be firm.
So are we witnessing that historic moment of convergence? I can’t wait to see how this will play. It would really be a privilege to see the birth of a new economic system adopting the ideals of private enterprise, and personal drive; but in the meantime fostering a stronger government role, through some form of ownership (vs. administrative moderation), to assure long-term economic value maximization and to enforce corporate governance.
After all, the public should not be excluded as a main stakeholder especially in a country’s giant corporations. If boards are formed to represent stakeholders, the government should definitely have a seat!
I believe there is no better place for such an economic system to emerge than the US, and there is no better time than this time of a global financial crisis.
I’ll stay tuned.
3 comments:
if u read alan greenspan, u'll see exactly what u are saying when talking about him talking about Russia and the transformation.
very interesting.
Seeing u thinking like that, I guess you might like that book.
will pop up somewhere else in the US economy later. How I see it is an attempt to postpone the crisis.
Re. greenspan, his example that you mentioned was more of the transformation from a government owned institute and control to an open economy. They initiated it agressively. This is the opposite of what is happening here.
One question: where did they get the 700$ from? From the taxes paid. Was this money suppose to be invested in something else, or solve more problems....Unless it is an extra money that was on hold for another military attack....
thoughts?
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