I would like to commend The Daily for printing Peter Hurley’s Hyde Park, “Trust me, we need that $700-billion bailout” (Commentary, Oct. 2). None of McGill’s student publications are known for giving a voice to the other side that doesn’t come off as one of those “I’m only conservative/capitalist/Republican because everyone else is liberal/socialist/hippie!”-type douchebags. That being said, I’m not quite so sure that the $700-billion buyout of the toxic assets is the best, or even the only, way to fix the financial crisis.
Sweden faced a similar problem in the early nineties. The basic gist of their plan was to buy up the toxic securities, let the worst banks fail, and then nationalize the ones that were too important to fail by buying their common stock. They ended up selling off most of the securities a couple of years later and sold off their ownership stake in the country’s biggest banks, ultimately recouping most if not all of the money. I’m not saying that this is the de facto solution, but it seems like an alternative Americans should explore.
In the Swedish crisis, the shareholders got burned, bondholders were protected, and the taxpayer was ultimately repaid. Being someone with money invested in financial equities myself, I usually understand the risks of investing in a company’s stock. If anyone should be burned for this, it should be shareholders, since they are the ones that assume those risks when they buy stocks. Of course, I’d probably be singing a different tune if I had money invested in a financial institution – but that’s another story.
Remember when AIG was begging the U.S. government to nationalize it for $75-billion, and the government not only agreed, but threw in another $10-billion as if it was a tip for a hot waitress at a fancy restaurant? To me, that’s a sign that the government really doesn’t know how bad this situation is, and that it’s just throwing money around. Doing nothing is dangerous, but I believe simply throwing money at these toxic assets without giving any oversight to the government or without any provisions for the taxpayer who will be taking on most of this risk can be just as disastrous.
Of course I’m also scared shitless that the entire society is unravelling into a Cormac McCarthy book, and that I’ll be wandering the Trans-Canada Highway one day with a neckbeard, wearing a torn-up flannel jacket, and carrying a half-loaded six-shooter for fighting off roving bands of cannibals – so if rationality doesn’t take hold soon, for the love of God, pump the entire 2009 budget into this thing!
Duong Pham is a U3 Economics student.