Without TARP and the bailouts ...

Don't get me wrong. I think the bailouts could have been handled much, much better. We should have carved a pound or two of flesh out of each and every fatcat who benefitted from them. But here is what I *believe* would have happened had the govenment not taken action:

Step one: AIG goes into default; goes into liquidation. Middle-class annuitants screwed as their annuities are frozen as courts decide who gets precedence in bankruptcy - them or Goldman Sachs.

Step two: Goldman wins! Annuitants "safe" investments now worthless. Pensioners plunged into poverty.

Step three: Bank of America, Wachovia. and other national banks go into liquidation. Taxpayers on the hook for massive payments to restore FDIC insured accounts to 100,000 limit.

Step four: Business lending in the U.S. essentially ends. Cash flow concerns lead to huge wave of bankruptcies of small to medium sized businesses.

Step five: Official unemployment rate hits 15%. Burden of transfer payments and FDIC payments cause deficits larger than alternate timeline.

Step six: Republicans in Congress call for massive income tax cuts to spur ailing economy. Make Bush cuts permanent and extend additional cuts to *investors* Controversial plan passes thanks to Blue Dogs.

Step seven: Lack of lending and delayed effect of business bankruptcies lead to worsening unemployment. Official rate hits 20%.

Step eight: Collapse.

say, 15% unemployment. Here again somehow the Rethugs have turned it around and used it to their advantage first of all most Americans think Obama did TARP. Even Joe Scarborough said he thought their should have been (more) infrastructure spending. Most Americans have no idea 1/3 of the Stimulus was tax cuts and most of the rest was for unemployment and keeping the states afloat. But somehow the Rethugs have demonised both.

We were standing on the brink.

It is the manner that it was done. We essentially handed trillions to the banks w/ no strings attached. Now that allowed the banks to survive but the time to make concessions is before you give them the money.

Taxpayers should be 30-70% owners of all the bank rights now. We should have drove a brutally hard bargin for the banks (who had no choice but to accept). As majority shareholders a trust could have been setup to set acceptable compensation policy and get the banks back into financial strength.

Eventually the govt could have sold it's equity posistions for a profit and returned banks to private control.

Instead we said "here $3 trillion does that make your problems go away? Yes? Ok."

Yet I haven't seen a bear in this neck of the woods for eighty years....

1929