Buffett and the bailout
Economists “overwhelmingly agree” that we “need quick, bold action” to stave off a deep recession, says David Leonhardt in The New York Times. But few of them agree that Henry Paulson’s plan is the right action. A main concern is that taxpayers don’t get any stake in the firms their dollars help. Paulson says that demanding ownership stakes would keep healthier banks from participating, keeping credit markets paralyzed. But he has a problem: Warren Buffett, who convinced relatively healthy Goldman Sachs to sell him a stake with very healthy returns. Paulson could be right, but he needs to sell his plan better. Otherwise “maybe the American taxpayers should be asking Warren Buffett to be negotiating on their behalf.”
About that $700 billion . . .
The U.S. needs to “unlock the capital markets,” and quickly, says Chad Gray in Seeking Alpha, but let’s be honest about what our actions will cost us. The “Paulson & Co. talking points” now assure us that the bailout ultimately won’t really cost us $700 billion, and that “Heck, taxpayers could turn a tidy profit!” The logic is that the assets we buy will have greater value than what we pay for them, because they’re tied to “a representative cross-section of American real estate,” both good mortgages and bad ones. That logic is flawed. “When Paulson opens up his financial waste treatment plant,” the debt thrown in will be the “most putrid” assets out there. The $700 billion is an expense, not an investment.
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- How to be the most productive person in your office — and still get home by 5:30 p.m.
- 43 TV shows to watch in 2014
- The science of sex: 4 harsh truths about dating and mating
- How our botched understanding of 'science' ruins everything
- How U2 became the new Nickelback
- 6 things the happiest families all have in common
- The secret to handling pressure like astronauts, Navy SEALs, and samurai
- Why you should stop believing in evolution
- 7 grammar rules you really should pay attention to
- 9 ways you're probably teaching your kids bad money habits
Subscribe to the Week