I'm not sure that I understand Doug's problem with Dean's approach. I was glad to see Doug take the same approach I used in the Confiscation Of American Prosperity in his nation piece -- that the problems are deeper than finance, beginning with a massive redistribution of income.
Just giving the banks money, won't change the fundamentals. They will be richer. The next administration will have its hands tied. And, as the market fundamentalists note, the bailout will give the financial people the confidence to repeat their past mistakes. If we need to protect ourselves with financial regulation, regulation will be unlikely once the banks are recapitalized. Not all economists are certain that everything will fall apart in the absence of rushing through a flawed bill. Better to take some time and do it right. Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Doug Henwood Sent: Wednesday, October 01, 2008 8:58 AM To: Progressive Economics Cc: Dean Baker Subject: Re: [Pen-l] fabulous Baker boy (part 2) On Oct 1, 2008, at 11:45 AM, Jim Devine quoted Dean Baker: > The weakness of the banks contributes to the downturn, but they are > not the core of the problem. We would still be facing a recession even > if all our banks were flush with cash. Hence the hype about the > urgency of the bailout was an invention. This really gives me pause. The financial system is imploding, and is in desperate need of recapitalization. One of the things that turns a recession into a depression is a cascading wave of bank failures and a contraction of credit. (This is something that Bernanke knows a lot about.) Intervention has to be quick or it will be too late. The longer-term stuff is very important, but unless you want to take the risk of a severe implosion (and I know there are some who want to do that), saying stuff like this isn't very helpful. Besides, the history of banking crises and interventions around the world shows that the longer you wait, the more expensive the bailout becomes, and the worse the economic damage. Oddly, Dean then moves on to accept the need for equity injections. So why this bit? Doug _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
