Public money for public problems • 29 September 2008 • The SnowBlog

Public money for public problems

I was talking to a friend today about that increasingly infamous $700bn bail-out in the US. He couldn't see why the money would be given to the banks rather than applied directly to the problems the financial crisis was causing in the economy as a whole. It is after all public money. So if it becomes difficult for ordinary people to get a mortgage or a college loan in the US, why not use the bail-out money to make those loans. That way you're buying good debt instead of bad. Let the speculators collapse but step in when the knock-on effect spreads beyond Wall Street. Of course some would argue the problem is too serious to let that happen. But this little article in the Guardian undermines the idea of the bail-out further because it reviews forty-two other banking sector failures and shows that buying up toxic assets with public money has no track record as a solution. Good job then that the deal has so far been voted down.


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