It's just like another Irak
Strangely enough, Hank Bailout Paulson is still getting some degree of support from Caps members. "But if we don't do it, the sky will fall and..." (here goes the sound byte: we'll have recession, depression, famine, civil war, the commies will come and steal our precious bodily fluids- pick your favorite line).
All of that horror reminds me about Bush's purpoted reasons for starting his war in Irak. It's the same rhethoric (the world will come to an end if you don't do as I tell you) covering the same materialistic goals (in a nutshell, someone wanted to strike oil), and it's just as unfounded.
The allegations that the bankruptcy of the banking system would bring a total apocalypse are an insult to our common sense. Because, let's face it, what exactly happens when a business fails? Two things happen:
1. Creditors are told the truth that what they thought was a reliable security is in reality a lemon that will only fetch then 70 cents on the dollar,
2. The original owner loses control of the business, packs his bags and retires to his island, and a rich guy from across the street wins the auction for the company's assets and takes over the building, the employees, the brand name, the computers in the main office which store the list of clients, and runs the business pretty much as usual (although he will probably want to sack the old management and trim some deadwood, which is not a bad thing).
So why not have it now? I point out that for an average citizen it makes no difference who gets to own his local bank, gas station or grocery store. If for some reason you want to use the services of Goldman and Sachs, does it concern you that 10% of your fees will go to a man named Buffett as opposed to a man named Goldman? There is no reason we shouldn't take all 1000+ banks to the bankruptcy court, force their creditors to accept a haircut and sell their assets to the highest bidder (the only reason BSC and AIG couldn't find a bidder was that the government wanted the buyer to accept all their liabilities, whereas in a bankruptcy procedure, assets are sold separately from liabilities, and the proceeds go to debtholders).
Now, I also point out that with or without recession, America is not (and will never be) a poor country where no citizen can afford to pay a reasonable price for a bank. In fact, we know there are trillions of dollars in America invested in government securities for lack of a better use. If anything, America is overflooded with cash looking for home. So don't worry, Paulson sycophants, it won't be another Russian-style privatization and we won't have students from Ghana coming over to the States to buy LEH for the $70 they'd earned picking cocoa nuts on their uncle's farm. There will be plenty of serious bidders offering competitive prices. We'll still hear Buffett complaing how hard it is to find a good bargain with so many people bidding.
So fear not, Fool, and don't buy Paulson's claims at their face value. The banking system won't vanish from the face of the earth, and bank employees won't be rummaging through garbage cans looking for food if several hundred crooked banks find their way to the bankruptcy court and find new and more efficient owners. The only reason he wants our 700 billion dollars is to keep current owners in the driver's seat. It's simply the largest instantaneous transfer of wealth from the largest number of poor people to the smallest number of rich people in recorded history.