My Current Feelings on the Bailout
By Arnold Kling
1. During the crash of 1929, the gossip sheet Variety ran a famous headline, “Wall Street Lays an Egg.” In those days, that was what you said about a show that the audience hated. If things keep going the way they are on the stock market today, will some newspaper tomorrow run a headline, “Washington Lays an Egg”?
(UPDATE: I didn’t realize that the bailout was in a precarious position. So the stock market was worried about it failing, and they were right. So it was the failure to pass the bailout the laid the egg.
I am willing to take the chance of having the plan voted down.)
2. When you hear the phrase “protects the taxpayers,” consider the sources. If you believe you really have protection, then I’ve got some Lehman stock I’d like to sell you.
3. Think of the mortgage securities market as a poker game being played on a ship. The game is grinding to a halt, because so many players have lost most of their chips. So they come out on deck and shout, “Emergency! Emergency! The ship is about to sink! Everybody needs to give the ship’s Bursar authority to play poker, using money from the ship’s vault!”
It’s not clear that the ship is sinking, or how reviving the poker game would help if it is.