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« One Fish Two Sexes... | Main | Boredom is More than Boring »

March 18, 2008 |Permalink |Comments (0)

Cab Dollery on the Bailout


Cab Drollery


What is going on in the bailout is well explained at Roubini's Global EcoMonitor.

Unless public money is used on a very temporary basis to achieve an orderly wind-down or merger of Bear Stearns this is another case where profits are privatized and losses are socialized. By having thrown down the drain the decades old doctrine and rule that the Fed should not lend or bail out non-bank financial institutions the Fed has created an extremely dangerous precedent that seriously aggravates the moral hazard of its lender of last resort support role. If the Fed starts on the slippery slope of providing massive liquidity support to non-bank financial institutions that have recklessly managed their risks it enters into uncharted territory that radically changes its mandate and formal role. Breaking decades-old rules and practices is a radical action that seriously requires a clear public explanation and justification.

The laws were carefully written over centuries because they provide the protections we all need. We all includes business interests. The world is in a financial crisis because the bases of the whole system, the laws, were violated.

The prosecution for this crime against humanity, which actually parallels that of the violation of every standard, must proceed.

309 days is too long.

****************************

It isn't just the family budgets that are facing shortfalls. States administer most of the programs that affect us directly, schools, roads and the like. With tax bases decimated, tax revenues are shrinking.

Programs for the elderly are being slashed in Maine. Government jobs are being eliminated in New Jersey. Prison construction has been put off in Virginia. Some schools in California will end their music programs.

About half of the state legislatures nationwide are scrambling to plug gaps in their budgets, shot through by rapid declines in corporate and sales tax revenue, distressed housing markets and a national economy on the verge of a recession.

Many states are reporting their largest budget shortfalls since the recessions of 2001 and 1991-2. In some states where tax increases are generally anathema, including Maryland and Kentucky, governors are looking to raise some levies.

“It is not just the standard downturn where unemployment rises for a while, income tax and sales tax revenues are weak, and ultimately the economy recovers,” said Iris Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington that tracks state budgets.

Ms. Lav pointed to a confluence of factors — including weak consumer spending, high energy prices, dropping housing values and growing foreclosure rates — that suggest states will face a protracted struggle to keep their budgets afloat.

“This all will make it harder to recover,” she said.

Too bad the Elite aka Superclass doesn't have kids in school or elderly parents

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There's more good writing here...

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