Dealing With Bankrupt Banks: Nationalization or Welfare

The media continue to do more to misinform the public than to inform
them when it comes to plans for fixing the financial system. Following
the absolute worst in journalistic practices, a front page Washington Post article
explains the Obama administration's policy by telling readers that the
"approach reflects Treasury Secretary Timothy F. Geithner's philosophy
of how governments should respond to financial crises."

Trees had to die for this garbage? The reality is that the reporters
have no clue as to what Timothy F. Geithner's philosophy of how
governments should respond to financial crises. The reporter knows what
Timothy F. Geithner told them, so why don't they just stick to passing
this information along to readers instead of speculating about his
innermost thoughts?

The excursion into philosophy deflects readers from the real issue.
Mr. Geithner wants to use taxpayer dollars to keep bankrupt banks in
business. In effect, he wants to tax teachers, fire fighters, and Joe
the Plumber to protect the wealth of the banks' shareholders and to pay
high salaries to their top executives. No readers of this piece would
understand that this is the process being described.

The Post editorial page carried on with this deception. An editorial on saving the banks
dismissed nationalization because it would involve the government in
running the banks. Then it discusses the idea of buying bad assets and
warns, "but there is a huge risk that the government would badly
overpay in the first place."

Actually, this is not a risk, this is the point. If the government
paid the market price for these assets the banks would be bankrupt and
we would be back to step 1, nationalization. The point of buying the
bad assets is to pay too much, so that the banks can get enough money
to stay solvent. (It is worth noting that deciding how much the
government will overpay, and to whom, also involves the government in
running the banks in a really big way.)

It would be nice if the Post and the rest of the media would report
honestly on the bank bailout and stop trying to conceal plans for a
massive redistribution of wealth to the bank shareholders and their top

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