I received an email recently that questioned why no one is making a bigger issue of the fact that much of the money paid in the so-called Wall Street Bailouts were just to make other bankers better off. The email also criticized my use of non academic publications (NPR and 60 Minutes in particular).
My response (only slightly edited):
I do not necessarily agree with the bailouts (and strongly disagree with them on philosophical grounds), but I can understand why they are being paid.
Are they worse than the alternative? I honestly do not know. While I still think I would let some banks fail and others suffer, this would come with harsh economic consequences of job losses and crushed dreams for millions.
The current strategy may come with similarly harsh consequences (setting a bad precedent, inflation, over regulation as a knee jerk reaction are three that come to mind instantly) as well, but these consequences are not assured. Thus, at least from that perspective (trading a sure bad for a possible bad) I confess I would be tempted to do the bailouts.
Would I? I am not sure. I would like to think I would not since it sets such a bad precedent. But if push came to shove, I might very well take Bernanke's path.
Why do I say that? Because I have in the past given extra credit assignments, graded on curves, and done similar things in the classroom that are not totally unlike a bailout.
I am glad you disagree and it makes me think that much more about my positions.
That said, I think the 60 Minutes piece and the NPR piece have their merits. Are they "hard hitting"? No. But do they bring information that we have not been exposed to in other ways? Yes. Therefore, I stand by their inclusion from time to time. "
So while I am sorry for not being strongly one side on this one, it is a tough tough situation, and after many many hours of thought over these last nine plus months (say from Lehman on), I still am not convinced one side is totally right or totally wrong.