Archive for the ‘Rent Seeking’ Category

The Geithner Put

Thursday, March 26th, 2009

How to make billions by getting the Obama administration to cover your losses:

Sachs calls it right:

But under the Geithner-Summers plan the loan is precisely designed to be a one-way bet, for the purpose of overpricing the toxic asset in order to bail out the bank’s shareholders at hidden cost to the taxpayers.

It’s one thing to spend hundreds of billions bailing out bank management, stockholders and bondholders. It’s another thing entirely to give away even more to politically-connected investment firms just to disguise the fact that you’re holding the banks harmless for their foolishness.

Auto Club

Tuesday, December 16th, 2008

Here are some worthwhile sources to consider on the GM/Chrysler bailout:

Joseph Stiglitz endorses Chapter 11 over an auto industry bailout (via Mankiw).

Todd Zywicki takes the same position, arguing the industry is merely “financially failed”.

Richard Posner comes out for at least a temporary reprieve, acknowledging that

The realistic goal of an auto-industry bailout is not to reform, revitalize, or restructure the domestic industry; it is merely to postpone its bankruptcy for a year or two, until the end of the depression is at least in sight and consumer confidence is restored to the point at which the bankruptcy of the domestic manufacturers can be taken in stride.

Gary Becker responds that a recession is a relatively good time to make the required adjustments to supply that will enable the industry to again become competitive.

Mickey Kaus has several posts, with the key one arguing that the problem is the very nature of Wagner Act unionism (i.e. work rules), even more than wages and benefits, that hobble the industry and doom a bailout.

Michael Barone adds some historical perspective to Kaus’ position, describing how the work rules were a response to early 20th century industrial efficiency theories and a GM that, just before the industry was transformed in the 70’s (by gas prices, environmental regulation and foreign competition), feared most of all a federal antitrust action to break it up.

Which brings to mind one of the Ronald Reagan’s classic jokes. The government’s view of the economy can be summed up in a few short phrases:

  • If it moves, tax it.
  • If it keeps moving, regulate it.
  • And if it stops moving, subsidize it.