Paulson has explained that his $700 billion bailout package is quite explicitly nothing more than a bribe for banks to come out of the darkness and declare their toxic waste, so that banks know who they can lend to. "If we design it so it's punitive and so institutions aren't going to participate" it won't "protect the system by avoiding as much failure as possible", is how he explained it to Chris Wallace. But you and I have no interest in avoiding as much failure as warranted, only in avoiding the plausible systemic breakdown of interbank lending that allows the rube goldberg contraption of the financial system to function.
A physical model of the financial markets: Your Noodle is Cooked
The reason interbank lending might freeze up is out of fear of who is holding the toxic paper: nobody knows who has lined their pockets with lead plates. I would like to know, myself, just what is preventing the fed from busting down the vault doors with an army of accountants, spread out across the land to discover and publish the details of every last scrap of repackaged pile of putrified paper, effectively lighting insolvent banks on fire and ending the threat of an interbank credit seizure because we would then know just who we can no longer lend to. No credit crisis, just a big fat fire to keep us warm through the death spiral.
My question is, basically: did they let the banks keep their 4th amendment rights when they stripped us of ours?
:: posted by buermann @ 2008-09-26 15:54:53 CST |