Fight The Financial Crisis,But Do It Right!
Published in Die Tageszeitung
(Germany) on 2 October 2008
by Reiner Metzger (link to original)
(Germany) on 2 October 2008
by Reiner Metzger (link to original)
Translated from
by Ron Argentati.
Edited by .
The first hurdle to the financial bailout package in the United States has been overcome. The Senate overwhelmingly approved the Bush administration's bailout plan. True, they had to add over a hundred billion dollars worth of tax breaks for individuals and small business to the already enormous $700 billion potential cost of the bill, but the motto is it doesnt matter, because, they say, if Congress doesnt show leadership now, other meaningful bailout measures will be sucked into the whirlpool and lost. And thats absolutely correct. Bankers and brokers are alarmed and urgently need time to calm the waters that surround them, even if the price for that medicine is unimaginably high.
Every participant and hostage in this global financial world and that necessarily means John Q. Public will have to pay for this medicine and for even more bitter pills down the road, because buying up those bad loans will no longer help much. Maybe a year ago such action might have calmed markets appreciably. In the meantime, however, banks have had other problems besides lost interest in the real estate branch. Their entire system of giving new loans to finance old ones has ground to a halt. Many banks require a direct infusion of new money for their balance sheets.
But heres where the blinders of political ideology come in, in the United States as well as in Germany. Giving money directly to the banks means, when all is said and done, that the government then has a stake in those banks. In return, the government gets stock or other investment guarantees. If the banks again become profitable, both reap the benefits of that success, the taxpayers as well as the banks, because the government can then sell its stock in the banks and make a profit as well. The current American bailout plan is the exact opposite of such a scenario: with it, bankers can unload their garbage at inflated prices to the government, then use their own capital to speculate in the next bubble that comes their way.
If billions of dollars or euros are to be spent in aiding bankers, then please, please do it right! You can only protect the public from being swindled if theres a sharing of the potential profits. The billions in loan guarantees with which Finance Minister Peer Steinbrück saved the Hypo Real Estate Bank represent nothing more than a sharing of the risks without the prospect of winning anything.
Every participant and hostage in this global financial world and that necessarily means John Q. Public will have to pay for this medicine and for even more bitter pills down the road, because buying up those bad loans will no longer help much. Maybe a year ago such action might have calmed markets appreciably. In the meantime, however, banks have had other problems besides lost interest in the real estate branch. Their entire system of giving new loans to finance old ones has ground to a halt. Many banks require a direct infusion of new money for their balance sheets.
But heres where the blinders of political ideology come in, in the United States as well as in Germany. Giving money directly to the banks means, when all is said and done, that the government then has a stake in those banks. In return, the government gets stock or other investment guarantees. If the banks again become profitable, both reap the benefits of that success, the taxpayers as well as the banks, because the government can then sell its stock in the banks and make a profit as well. The current American bailout plan is the exact opposite of such a scenario: with it, bankers can unload their garbage at inflated prices to the government, then use their own capital to speculate in the next bubble that comes their way.
If billions of dollars or euros are to be spent in aiding bankers, then please, please do it right! You can only protect the public from being swindled if theres a sharing of the potential profits. The billions in loan guarantees with which Finance Minister Peer Steinbrück saved the Hypo Real Estate Bank represent nothing more than a sharing of the risks without the prospect of winning anything.