The sin of bailing others out
Kai-Alexander Schlevogt; 27/9/08
Markets are said to outperform central planners, but ironically central planners are routinely called in to rescue markets. In the immediate aftermath of the financial turmoil on Wall Street, which has shaken the world, the US treasury secretary asked for dictatorial economic powers. This despite the fact that he has already nationalised his economy faster than many socialist countries that he strongly dislikes. A former chairman and CEO of the investment bank Goldman Sachs, which curiously so far has been spared significant hardship, he requested $700 billion, equal to 5 per cent of the GDP, from Congress. He also demanded the right to spend it on any financial assets he fancies without any court intervention. Those include toxic assets, which even the most risk-friendly speculators are shunning and if marked to market, would trigger even more spectacular bankruptcies. And the whole package, outlined on only two-and-a-half pages and portrayed as the only way out of the crisis, was to be approved within days. The lack of transparency, accountability and control invites corruption. Politicians in the future will love to have access to such a large pool of money to be spent on their pet projects.