Today the stock market, as measured by the Dow, dropped over seven hundred points. Investors have a shaky outlook on the economy. It does not take a financial expert to know that we are in deep trouble. A trip in the car to the grocery store tell us how much trouble we have on our hands. Price increases are now an everyday occurrence.
As a way of stabilizing the financial institutions, Treasury Secretary Henry Paulson will invest $250 billion dollars into the banking system. The government will take an ownership stake in these financial institutions. The hope is that this will give the banks the incentive to initiate loans again. The goal is to re-establish trust so that the flow of capital resumes again and it is business as usual.
This is $250 billion dollars of taxpayer’s dollars.
What is disturbing is that the taxpayers will invest in the bailout. However, the government will maintain a “hand-off” approach to these financial institutions. Shouldn’t the investment of such a large amount of capital justify having input in future operations? It seems that would be only sensible. It is the responsible oversight of public funds.
Nevertheless, this government has not demanded input into the operations of these financial institutions. These private enterprises, for the moment, operate because of public funding. It seems that the government has backed financial institutions and executives who made the initial policy decisions which created this financial quagmire. What is to guarantee that bad decision making will not re-occur?
It seems like plain common sense. If a friend or family member has made a series of bad financial decisions that has pushed a promising business to the edge of ruin, you might help. You might invest some capital – with the proviso that you have some say in what will happen and the decisions that will be made. It would seem foolhardy to put money into that near disaster business and say ‘good luck’. Unfortunately, that seems to be exactly what the government has done. It has invested and taken a hands off approach… with public funds. That approach just seems irresponsible.