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The Bailout
Wednesday, October 01 2008
Obviously the $700 billion bailout plan [and subsequent House of Representatives rejection] is dominating the news these days. Even though I have a degree in Accounting, I'm no financial wizard and figuring out exactly what caused this mess and how to correct it is a job for bigger brains than mine. But I try to keep up with current events. And it seems to me that a good source of information about the economy is probably, um, economists. So I've turned to Stephen J. Dubner and Steven D. Levitt at the Freakonomics Blog.
The straw that broke the camel's back, otherwise known as Fannie, Freddie, Lehman and A.I.G. say uh-oh. Levitt asks his fellow economists, Doug Diamond and Anil Kashyap, to discuss the current crisis. It is a succinct and intelligent explanation that puts things in layman's terms so the average Joe [like me] can understand how we got into this mess and what it might portend for our future. If you don't read anything else at all about the current situation, at least read this.
Of course, one of the first things I think about is history. Have we ever seen anything like this before and how can we learn from it? To answer this, Dubner pulls in John Steele Gordon who writes The Financial Mess: Greed, Stupidity, Delusion - and Some More Greed. Corruption and greed seem to be at the heart of his theory and I honestly can't disagree with him.
Now we have to figure how the hell to get out of this mess which leads to re-regulation, $700 billion of taxpayer money and politicians trying to get re-elected.
- Bailout Plan, the first draft
- Economists vote no
- Final Bailout Plan
- House of Representatives vote no - Bailout Plan denied, when Economics and Politics Collide
- And a subsequent Mea Culpa that economists have a responsibility too
- Lest we forget that everything has risk, here are the risks associated with re-regulation
But in the end, my favorite [comical] analysis so far is Jon Stewart's [hat tip to Justin Wolfers of the Freakonomics blog]:
~tod
