Tuesday, September 30, 2008

Holy Bailout, Bat-man!

Well, the Wall Street bailout is dead for now, a massive wreck with mangled, charred bodies dangling from the shattered car windows. Or maybe not. I've been trying to wrap my brain around the disaster for the past few weeks, reading about collateralized debt obligations, stanches (ratings), subprime mortgages, and the like. I know very little about how Wall Street works, but it seems to me that too much faith was placed in the U.S. housing market as a way of making infinite profits, and too little attention was paid to the risk that housing prices might drop. It's like we're a banana republic, only our bananas are our houses. Whatever financial and regulatory structure emerges, there probably should be some checks and balances on overreliance on any particular form of wealth to support exotic securities that are beyond my comprehension.

I'm on the fence as to whether the Government should fix the problem to begin with--I wonder how much a large-ish drop in the stock market would really affect the rest of the economy--but I tend to lean towards whatever will preserve my Thrift Savings Plan and other peoples' 401(k) plans, and whatever might preclude a severe credit crunch that could result in banks owning businesses that rely on short-term credit as a matter of course.

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