I’m really torn about the goings on in our financial sector. On the one hand, I’m pleased that the Fed and the Treasury are getting it right this time—unlike 1929 they are not acting in a way that will make the situation worse. On the other hand, I’m really bummed that a lot of greedos are getting away with their largesse. One of the features of the 1929 crash was that the bust took down most of the people who caused it. Of course it also took the economy as a whole down. It looks like neither of those things are going to happen this time. The other part that bothers me is that those of us who didn’t take on debt beyond our ability to pay (personal or corporate) are going to suffer along with everyone else, even if it’s only indirectly. My grandkids will still be paying for all the liars who falsified their mortgage applications and all the financial executives who took fliers on credit default swaps (and received the corresponding bonuses) that they had do idea how to value.
No one will want to admit it but American capitalism is dead (it’s been moribund for decades). Dead at least for any company big enough to have a significant impact on the economy. The smaller fish will still be subject to the vagaries of the business cycle. In the new crypto-capitalist scheme the government should insist that any company expecting a bailout should install an executive compensation scheme (and the requisite contract clauses) that tie pay to performance—if you fail, you get nothing and bonus pay should be retrospective after the true outcomes are known.
The key now is deciding whether we want to act to prevent situations like the one we’re now enduring or just continue to clean up afterwards. My guess is that people are so confused about the capitalism/socialism issue that business special interests will be able to stave off any direct control—maybe even any really effective regulation. JK Galbraith should be required reading for anyone allowed to vote—the lone sane economic voice in the last 75 years.
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