Debate: Should taxpayer dollars be used to bail out a private company?
Side: Bailout

First let's define some terms and concepts or else we can get bogged down in semantics all week here. None of these companies are "private" companies. I am sure the discussion would be different if we were talking about private or closely held companies like Mars, Danaher or Koch Industries. Second, Fannie and Freddie are a different discussion because they are uniquely chartered as quasi governmental entities (GSEs). Third, each of these actions, or bailouts, are different and were handled differently and for different reasons. The government has treated each case differently and so must we. Fourth, we are not now nor has the United States ever been a pure capitalist state. It isn't, It can't be and it shouldn't be. So all arguments on the basis of purity of theory (this means you Ayn Rand) sound good but aren't practical or truly germane. Pure capitalism and pure socialism should not be discussed in terms of relative morality. They are theoretical economic systems. History seems to dictate that neither can work, or even exist in a so called "pure" form. Both always, without fail run into human nature when applied to real life and reside outside the realm of the theoretical. If human nature was not a factor we would not need laws and regulations at all but in the presence of human nature, a HUGE monkey wrench is thrown into either theoretical system. So hopefully we all agree that SOME level of government regulation and system of laws is necessary. Classical economists such as Bentham and Mills, have turned into pseudo philosophers trying to quantify the effects of human nature on various economic theories. Once we agree to that, any argument for or against a new action solely on the argument of purity of the free market or purity of the respective economic theory is undermined IMO. Hopefully we now all agree that there is a need for government imposition of will to SOME level in the free market economy which we embrace in this country. Next is to determine for what purposes the government should interfere. This is a constant tug of war. The period from the 1860s to the 1920s saw incredible accomplishments. The rail industry, Oil industry, steel industry all went from infancy to maturity in this short period largely because of nearly unfettered free market forces. But they were each built on a magnitude of human indignity and suffering that our society eventually deemed unacceptable. So, this leads me to an artifice I intend to add to the discussion. We now need to discuss to whose benefit an economy and thus economic system is "supposed" to operate. For this we need to bring in governmental systems to work in conjunction with an economic system. In a monarchy it is easy. Everything governmental or economic is for the benefit of the monarch and hopefully he cares for his subjects. In the United States, our founding documents declare that the government is of, for and by the people so it is pretty easy to decide that both our economic and governmental systems should be governed by what is best for the people. But the phrase "the people" is nebulous and the complexities of modern issues make it hard to get a majority, never mind unanimous consensus on what is best for the people. So I always think of society as an entity with its own rights. This stands in for the now out of favor term"most good for the most people". This helps me clarify situations where what is good for one part of "the people" is not good for another part of "the people". Concepts like greed or fairness or growth are best thought of in terms of whether their effect is good for society instead of good for "the rich, the poor, the educated, white collar, blue collar." For example, there is nothing inherently wrong with naked shorts. But they were abused to create great mischief. A theoretical free market demands open shorting, the real world demands limits, not because open shorting is inherently bad but because human nature will eventually corrupt the purity of the system. Up ticks, speculation, arbitrage, derivatives, all have the potential for abuse. Just the way any rule does. Can't plug every loophole. If we legislate without considering human nature, we waste our time. Now finally we can begin to address the question at hand. Hopefully we all agree that government intervention is necessary at times in a free market economy because left to its own devices, human nature will twist the free market. When we agree that govt intervention is necessary it starts on a slippery slope that leads us this way: If the government has to act sometimes, it also has the responsibility to do so on the behalf of the people. If it bears that responsibility, it has to decide when it is proper and when not proper, to intercede. So that answers PART of the question. Yes if it deems it in the best interest of society (ie. the people) it has the responsibility to take action. It needs to weigh the good done against the costs and THEIR effect, etc. So yes, the government should act when it deems the contemplated action to be in the best interest of society. Now let's go to the flip side of the coin. Those of us who whine and scream about our rights, are usually the last ones to acknowledge or fulfill our responsibilities. In this case, the government acknowledged their responsibility to act, but neglected that responsibility. In creating the community reinvestment act, it mandated sub prime loans. This was done out of the highest of motives, encouraging and enabling home ownership. That good motive of course fell prey to human nature and it turned into loopholes over the years. For many years an old Reagan treasury official has screamed about the abuses of these GSEs and no one listened. Several years ago a Bush appointed regulator raised an alarm about the way Freddie and Fannie were encouraging the risky loans through their loan packaging and standing behind loans with less and looser underwriting criteria and finally a few ears listened. This whole mess could not have come to its current state without the CRA and its high mind and purely good intentions, without the abuse of the quasi government agencies, and then, without the complicity of the government . . . because when a regulator blew the whistle, when the administration tried to get reform of Fannie and Freddie, a couple of highly placed and well regarded members of congress who just happen head the oversight committees watching over Freddie and Fannie. They also happen to lead lists of those who got preferential loans from Countrywide and they happen to be high on the list of those who received the most campaign contributions from Fannie and Freddy. So . . . I would say that the government has a RESPONSIBILITY to act in light of ts complicity in causing the problem. It had forewarning and refused to take action before this became a disaster. So now it owns the disaster. Eventually, someone has to realize that corporations are not Al Quaeda. They ARE Americans and America. The government does not put corporations over individuals. This country has the second highest corporate taxes in the world. Corporations don't pay those taxes. Their customers do. If we raise taxes on corporations, it is a cost like any other that gets passed on to the customers, individuals. Do you really fall for the nonsense that Obama can cut taxes on 95% of working Americans by raising taxes on the rich and on corporations? Do you believe taxing corporations doesn't end up as a tax on consumers by raising the cost of goods we purchase? Bailing out Freddy and Fanny were slam dunks. They were core to the infrastructure of this nation. The job is half done. They now need to totally reform the mission statement and oversight of these agencies. Fire some more execs like Franklin Raines so Obama can hire them as key advisors. I have no problem with this. Obama can learn more from Raines and the ex chief counsel on how to reform things than by outsiders. My problem is that if we accept this, why cant we accept that when Cheney is trying to work on energy policy, the first folks he talk to is oil companies. On both parties it just makes sense to go straight to the horse's mouth and we shouldn't be so cynical as to just assume the worst automatically. So I feel it was appropriate to save Freddie and Fannie. Now we need to reform it. I suggest:1. it is quasi governmental. It has no business engaging in lobbying activities. They have spent $170M on lobbying in the last decade.2. If Americans are going to assume risk on behalf of these companies, the they should share the benefits. Let the funds from the government be paid to the social security system and let the companies pay junk bond rates to the social security system so that it can pay us more than 1.5% interest on our social security money. This provides liquidity and bridge loans at near prevailing rates. It also lets us not get into the business of lending but merely lend when liquidity is dried up, not merely expensive.3.We mostly agree expanding home ownership benefits everyone. I don't hear griping that we spend $175M a year to encourage home ownership without the Freddie Fannie bailout even though this subverts the purity of the free trade markets.4. We should reexamine and modify the charter of these GSEs to maintain their mission while narrowing their options to accomplish the mission. There should not only be no incentives to be creative with funky new programs, they should be prohibited from helping the private sector be creative in this manner.5. These giant lenders should be subject to capitalization and lending caps similar to normal banks.I am sure there is more but that will start. If we don't go this route, then we should go all the way and adopt the Forbes plan to break these GSE's up into smaller units with no government linkage at all.Now, finally for the Lehmans, Countrwides, AIG etc. I don't think any of us are sufficiently knowledgeable to determine which companies are, and which companies rent so intrinsically entwined in the economy as to be necessary to prevent disaster. I believe in what the Govt did for BAC in the Countrywide deal. They guaranteed a set amount of potential losses in order for one company to take over another when normally it might have just gone under with disastrous results. I am sort of on board for the AIG deal except again, I feel the people who are assuming the risk (you and I) should participate in the reward. We should put restrictions or mandates that serve the public interest and we should be paid back with interest. Let the social security fund hold junk bonds. Let the profits from those bonds be used either to pay social security payments or redeem bonds sold by the govt to fund social security. Either way we benefit from the risk we took.