Friday, September 19, 2008

Is it this simple?

Like probably many Americans, I go back and forth on the wisdom of certain govt. bailouts, but is it as simple as:

1) Estimate how much money the "taxpayers"* would lose should firms such as AIG fail.
2) Estimate the costs of the bailout.
3) Choose the lesser cost item.

??

*Taxpayers should likely not include the direct shareholders of the firm, as these are the ones who knowingly took on risk. Instead, how much would the innocent taxpayers lose due to the collapse? After all, the shareholders took the profits during the good times.

UPDATE: No, not that simple, as it assumes the govt has as much money as needed, when it doesn't. Doh.

4 comments:

pjd said...

Also not that simple because of the ripple effects of certain businesses closing without warning. I am not in favor of bailouts even if the cost to taxpayers would be less to bail out than to let fail. If that were the case, then accounting and business practices would treat bailout as a viable Plan B when it should only be considered in the case of a truly disastrous meltdown. IMHO.

writtenwyrdd said...

I've got to ditto pjd. Bailouts are a bad idea, IMO, but now that we are in this situation we should address the fix with various options, including possible bailouts and regulations that control risky speculation with customers' capitol.

I am sure there are other things to be done, too. I don't know a lot about economics!

ChrisEldin said...

I don't understand all of the ramifications of this. Is it true that the U.S. economy was days away from total collapse? That's what I heard someone on CNN say. I don't understand how that could be true. Days away? Is nobody at the wheel? Or is the driver text messaging someone...

writtenwyrdd said...

Days away? I rather doubt it.