I wonder why Congress found it so easy to rescue manufacturers of CDSs and CDOs, but balked for so long at rescuing the manufacturers of CARs. (Breaking news is that Congress may provide a short-term bailout.)
The excuses don't make sense. If it is because the auto makers are chronically sick, well so are the financial firms, but they had the benefit of Standard & Poor's and Moody's corrupt AAA ratings for their mountains of crap. If it is because there are healthy foreign auto manufacturers in the US, then the same is true of financial institutions. If it is because the auto makers only have an incoherent plan for recovery, well so is true of the financial institutions.
The auto makers are cheaper to rescue, at $34 billion compared to $700 billion (plus some trillions in Federal Reserve loan guarantees that put taxpayers' money at risk).
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The correct answer, btw, to the "socialize the risks and privatize the profits" model of financial industry is to de-privatize the profits by taxes.
Friday, December 05, 2008
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