Is The “BAILOUT” Permissible

I guess you could suppose that this post is for all you economics freaks out there, and also all you philosophy nerds. The questions that I would like to take into consideration are: 1) is the purposed bailout morally permissible? 2) is it really going to create a long-term solution? 3) is this really a move toward “socialism?”

Is the bailout morally permissible? I think that before I propose to explain why it is or is not, let me first provide some back-ground about the bill itself and what it is supposed to “do.”

The bill (summarized version) is as follows, or you can see it at: http://blogs.wsj.com/economics/2008/09/20/treasurys-financial-bailout-proposal-to-congress/

-Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

-he Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

The objective of the bill is to aid financial institutions in freeing up their capital and allow for resumed lending by taking off the books of these institutions their failing sub-prime [and other] mortgages. By allowing these institutions to renew lending, it is hypothetically supposed that 1) Lending institutions will be able to lend more freely, 2) If (1), then people can take out more debt, 3) if (2), then banks make money, and the economy improves. I recognize that 1-3 are very simplified, but -from what I have gathered- that is the main point of the bill. I suppose that Paulson and Ben are correct in this, and that by injecting more money into the financial markets, you allow for renewed lending. However, is that what America needs? 

The problem of “the credit crisis” is not that difficult to understand. In simple terms, we can describe it as the occurrence of numerous foreclosures in the housing market that caused a chain reaction that brought down thrifts, holding, and investment companies. However, it is much more difficult to detect the cause of this crisis; perhaps, it is president Bush, and the so-called “ruined economic policy,” but that seems to be ad hoc. There, for it to be this big, must be something more; maybe a cluster of events and problems both in government and wall-street. However, I feel that we can start somewhere… In 1995 President Bill Clinton signed legislation making it easier for minorities to purchase homes. This idea was principally perpetuated by his had his Treasury Secretary, Robert Rubin, who -thanks to the legislation- rewrote the lending rules for the Community Reinvestment Act, opening the flood gates of mortgage lending to unqualified borrowers. These borrower were minorities and even at times illegal immigrants who had never been adequately qualified to purchase a home because the CR Act required lenders to “push them.” The final occurrence is that as energy-prices and instability in certain real-estate markets -and due to the IRRESPONSIBILITY of americans- caused augmenting number of foreclosures, and now, we run into the current situation. The problem was the initial flooding of sub-prime mortgages by the demand of the Clinton administration. Nevertheless, nor are therepublicans free from the blood of the people hurt by this crisis. They also engaged in erroneous ties with mortgage companies as the big-wigs of wall-street participated in their money orgy with the democrats -to prove that it was a “money orgy with the demarcates” just look at FNM and FRM (Fannie Mae, and Freddy Mac) and do some research as to who the board, CEO, and other governmental affiliates were. So, I suppose it is safe to conclude that:

1) certain parties [i.e Democratic] were the main perpetuator of the problem at hand.

2) republicans did nothing to stop it. 

3) Wall-street was greedy

4) Americans are irresponsible with their money and equity. 

So, is it morally permissible? 

NO! I don’t think it is even close to being such. This bill will bail-out these institutions [if it passes] and it will cause the market to BOOM in relief that the Fed has saved the day (which is actually you). Regulations on lending will be half-heartedly addressed and fixed, the CR act will not be adjusted promptly as to sufficiently stop the same mess from re-occurring. Additionally, it causes one bad thing -morally- and that is it will not install any sense of responsibility into the american people or the “business world” of america. By bailing out some one and hence not teaching them, and us, a lesson, we are limiting their ability to self-improve or at least “learn from ones mistakes.” We could -possibly- be hurt by the lack of accountability that we still have because we know that the fed is there with its check book. 

Is it economically sound?

There is much debate here, so I shall leave this as an open question for you to consider.