Wall St. Should Pay for any Bailout
We received this assessment of the crisis from Ian Fletcher, an economist in private practice in San Francisco. You can reach him at ianhfletcher (at)yahoo.com.
Social insurance against economic volatility is widespread (starting with unemployment insurance) and economically rational, so I wouldn’t have a problem with the bailout if it were being paid for by the people who benefit from it. (This is, of course, how unemployment insurance works.)
Wall St. made this mess, Wall St. collected the profits while the going was good, and Wall St.’s chestnuts are being pulled from the fire. So Wall St. should pay. Complication: Wall St. is currently broke, so it can’t pay. Fine: they can pay by surrendering a portion of their future profits to the public purse. One could structure this any any number of ways, whether by means of equity stakes in the banks, a special tax, or something else.
Ill-gotten gains from the past 10 years should also be clawed back, stating with golden parachutes.
The abolition of investment banking is shocking. Even FDR didn’t dare do that; he just separated it from commercial banking. Laissez faire has confessed its own inability to run the show. The Europeans have won the argument about the nature of capitalism.