The Backlash Begins
The relief that greeted the Treasury Dept.’s $700-billion plan to bail out the financial markets is turning in an new direction this week, as people begin to study the details.
Plenty of prominent voices – Paul Krugman among them – are concluding it’s a big blank check for Wall Street that does nothing to help the average homeowner facing foreclosure.
You would expect a populist backlash for any sort of effort to prop up investment banks with taxpayer money. But there’s more to the objections. They’re also coming from financial experts and observers who don’t usually rail about the unfairness of the system when it comes to the mortgage mess.
Here’s the opinion of Calculated Risk, the most influential financial blog on the Internet:
The current plan is vague, opaque, has almost no oversight, puts the taxpayers at extreme risk and encourages future moral hazard. A better plan would be transparent (all deals would be publicized), involve a share in ownership for the taxpayers, and have substantial oversight. We can do better.
We’ll all find out this week whether the sense of urgency in avoiding a global meltdown — the thinking behind the Treasury Dept. plan — will outweigh these growing objections.