Thursday, September 25, 2008

Martin Wolf on the Treasury Plan

The Financial Times'es Martin Wolf advises us that "Desperate times call for desperate measures. But remember, no less, that decisions taken in haste may shape the financial system for a generation. Speed is essential. But it is no less essential to get any new regime right."

Among other things he agrees on a plan proposed by Professor Calomiris: "If, as seems plausible, a scheme that imposes such pain on the financial sector would be rejected out of hand, the next best alternative would be injection of preference shares by the government into decapitalised institutions, on the lines proposed by Charles Calomiris of Columbia University. This would be a bail-out, but one that constrained the behaviour of beneficiaries, not least on payment of dividends. That would make it far better than dropping benefits on the unworthy, via mass purchases of overpriced toxic paper."

1 comment:

Anonymous said...

On the one hand drastically trying to change the market and its acticivity could cause massive repercussions. And the proposed bnailout seems to currently be working in the short-term of raising comapany priceies, but i all seems spectical to me. The bailout scares me in a giant way, where is the money coming from? from what I hear that it coming frm Japan and Chna loaning us the money and that we will pay them back over period of years. but i offer a different solution....In the 1940's the government offered up a series of war bonds to finance the war. With the purchased war bonds they produced war manufactured goods which provided jobs during a time of great economic turmoil. Why do they not create economic bonds for the current recession that would mature over 25 years. If a plan was enacted we would help keep the Money In the United Stated instead of asking for it and we would also ask for help from the People within the United States that still have money to spend. In the long run veiw of things, instead of raising taxes to pay back japan and china, we could pay back the people of the United States who would put back money into the economy.
-Michael Perry