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Re: Madness: Bailing Out Greed in Wonderland
From: David Farber <dave () farber net>
Date: Wed, 17 Sep 2008 05:28:27 -0400

Begin forwarded message:

From: Scott Alexander <salex () dsalex org>
Date: September 17, 2008 12:30:43 AM EDT
To: dave () farber net
Subject: Re: [IP] Madness: Bailing Out Greed in Wonderland

The Salon article, "Who deserves a taxpayer bailout?" (http://www.salon.com/tech/htww/2008/09/16/bailout_aig/ ), is the best description I've seen of why some companies are considered critical and others aren't. Based on that article, it does seem clear that allowing Bear Stearns to founder would have had wider effects including on people who didn't have reason to realize their investments were tied to Bear Stearns (and who stood to make nothing on the risky investments that were made).

Of course, what it doesn't explain is why it is considered sensible to privatize essential functions of our financial markets in this way. If things like clearing and issuing mortgages are crucial to the economy perhaps they should either be functions of government, of not- for-profit entities, or of entities with very limited business even if that means they provide very low returns. Come to think of it, that sounds like the way that entities like the stock exchanges and banks were structured particularly after the Depression. Hmmm....

Scott Alexander

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