Insurance like that is priceless. But for the banks, the best part is that the government is paying them--in some cases billions of dollars--to accept its seal of approval. For taxpayers, on the other hand, this entire plan is extremely risky, and may well cost significantly more than Paulson's original idea of buying up $700 billion in toxic debts. Now taxpayers aren't just on the hook for the debts but, arguably, for the fate of every corporation that sells them equity.
This grotesque duplicity is an opportunity. Whoever wins the election on November 4 will have enormous moral authority. It can be used to call for a freeze on the dispersal of bailout funds--not after the inauguration, but right away. All deals should be renegotiated immediately, this time with the public getting the guarantees.
It is risky, of course, to interrupt the bailout. The market won't like it. Nothing could be riskier, however, than allowing the Bush gang their parting gift to big business--the gift that will keep on taking.
Published on Friday, October 31, 2008 by The Nation