The Wall Street Journal has the prepared testimony of Ben Bernanke and Henry Paulson. Neither one spells out exactly what sorts of financial institutions are in difficulty and how that difficulty translates into problems elsewhere in the economy. Neither prepared text answers the basic question of whether the goal is to buy undervalued assets cheap or to make cheap assets dear.
However, the Journal interprets Bernanke's oral remarks as saying that the goal is to make cheap assets dear. If this is the correct interpretation, then my opposition to the bailout, which was 8 on a scale of 1 to 10, is now 11.
Tim Carney explains what AIG did for a living, namely credit default swaps. Pointer from Megan McArdle, who is willing to give more credence than I am to the view that the financial situation is so dire that we need drastic measures. Someone else for me to debate, perhaps, although we would have to preface a lot of our remarks by saying, "I don't know for sure, but based on what I am hearing..."
Greg Mankiw has a list of links. My favorite of these is Roger Lowenstein, who dares to ask what the finance industry that makes its health a source of huge concern to the rest of us.
I'm reminded of how Ken Rogoff used to complain about how perverse it was for relatively poor countries to be transferring capital to the U.S. Isn't it somewhat perverse for average taxpayers to be transferring capital to financial institutions?
Steve Landsburg has similar thoughts.
Anyone seen this yet?
http://www.youtube.com/watch?v=SwRFoxgEcHc&feature=related
I'm going to post this request at a number of econ blogs I read, in case others have suggestions.
I'm feeling, rather desperately, that we need a faster tool for critiquing and comparing the different proposals out there. I want a mechanism by which the experts can point out flaws in different solutions and arrive at an optimal selection (if not consensus). If this all has to happen in a week, the blogosphere needs to be even faster than usual.
Is there a site out there doing that now?
Could wikipedia support this, or would the comment threading collapse under the weight?
Other suggestions?
I also hear the argument that we need to do this to prevent unemployment, etc. For this to fly, you would have to convince me that this $700,000,000,000 bailout is going to prevent the economy from losing over $700 billion dollars in value. Seems the Communist Party of the US is opposing all of this on the basis that the working classes shouldn't be bailing out millionaires and billionaires. I mean, come on, even the Communists are right on this one, and history has proven them to be wrong on almost everything.
I caught the first few minutes of Jim Cramer today and he is in favor of the plan. His reason is that the Paulson plan is all about foreclosures. He cites a rate of 10,000 new foreclosures per day. If we could come up with a system that invested directly in the troubled home borrowers and minimized moral hazard by requiring credit counseling and refinancing into a sustainable loan product, we'd be on the hook for a lot less money. We don't have to save them all, just enough to stabilize things.