Assuming, as we surely must, that a bailout is coming; the question before us is whether it should come quickly, as Republicans insist it must, or later "after deliberation" as Harry Reid and the Democrats argue it should. Thomas Sowell makes a very good case (and one, frankly, that had not occurred to me) for haste. Why? It’s not just that we need a bailout to avoid disaster; there’s an additional incentive to quick action. While the adage "haste makes waste" applies to normal people and normal institutions, we’re talking about Congress . . . and a Democratically controlled Congress at that. In Sowell’s words:
Whenever there is a lot of the taxpayers’ money around, politicians are going to find ways to spend it that will increase their chances of getting re-elected by giving goodies to voters.He also offers some thoughts on the morality of the bailout; answering both those critics who attack it as wrong because they believe it rewards and, therefore, encourages irresponsibility and those who attack it as rewarding the irresponsible wealthy (Wall Street) but punishing to the weak (people losing their homes because they can’t pay their mortgages):
The longer it takes Congress to pass the bailout bill, the more of those goodies are going to find their way into the legislation. Speed is important, not just to protect the financial markets but to protect the taxpayers from having more of their hard-earned money squandered by politicians.
Financial institutions are not being bailed out as a favor to them or their stockholders. In fact, stockholders have come out worse off after some bailouts.
The real point is to avoid a major contraction of credit that could cause major downturns in output and employment, ruining millions of people, far beyond the financial institutions involved. If it was just a question of the financial institutions themselves, they could be left to sink or swim. But it is not.
We do not need a replay of the Great Depression of the 1930s, when the failure of thousands of banks meant a drastic reduction of credit-- and therefore a drastic reduction of the demand needed to keep production going and millions of people employed.
But bailing out people who made ill-advised mortgages makes no more sense that bailing out people who lost their life savings in Las Vegas casinos. It makes political sense only to people like Senator Dodd, who are among the reasons for the financial mess in the first place.