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 executives.
© 2009 The American Prospect