Reply #2: This is a doomed "trickle down" economic bailout plan [View All]

[clear eye]

That the expansion of the assets to be bought include just about all defaulted loans the large financial institutions are carrying indicates that this is not a situational bailout of some institutions, but a bizarre effort to fix the tanking economy by "trickle down". All these things--credit cards, student loans, loans in general, are failing because the economy, "Main St.", is failing. Trying to fix it this way will make things immeasurably worse.

For the first time in history, there exists the danger that the U.S. economy simply won't be able to afford the debt service (interest, etc.) on all the country's debt, private and public. The outgrowth of such a crisis would likely include a large devaluation of the dollar. It starts a vicious cycle where the "rescue", while temporarily bailing out investment houses and banks, makes the economy worse, so people can't pay back more loans, so more "assets" need rescuing, and so on. In a shockingly short time there will be no way to save the financial institutions, and the money needed for a proper rescue of the economy will be gone. Among the consequences would be the bankruptcy of vital support programs for the elderly and a complete devaluing of their savings.

With the tens of millions of Baby Boomers becoming too old to compete for jobs in a shrinking economy, the country could find millions w/o the means to provide themselves with their basic survival needs. As happened in the crash of the Argentinian economy, formerly middle-class citizens could find themselves homeless and starving.

The only feasible way to rescue the financial system is to do the leanest of rescues while re-regulating, restoring taxation on the ultra-wealthy, corporations, and estates, and providing direct help to the people by job creation including support for the manufacturing sector, which would stem the flow of defaults. This is also the only way to prevent the slashing of vital gov't programs like Social Security and public schooling.