Bill Gross Wants Treasury to Buy Assets to Prevent Tsunami
By, Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.com/2008/09/bill-gross-wants-treasury-to-buy-assets.html September 4, 2008.
The Article discusses what Bill Gross, co-chief executive officer of PIMCO, wants the U.S. Government to bailout companies/private investors and allow lenders to forgive some of homeowners' debt. The author Mike "Mish" Shedlock replies to Bill Gross’s ideas.
In essence, what is better for our economy for the United States Government to bailout distraught companies and possibly recreated the problems we are trying to fix by actually trying to fix our economy with what caused these hardships in the first place or to just leave everything as is and let the economy fix its self.
The last few years have been fraught with great money making opportunities along with several economic bubbles bursting, from the dotcom bubble to the recent housing bubble, According to author bailing out private investors was tried many times and it has failed every time. And that the bubbles where in direct cause of the bailouts by Chairman Greenspan.
Personally, I cannot see direct a correlation between bailouts and harm to the U.S. economy. Bailouts are not used every time a company fails, nor should they be. The question is when Government intervention should happen and to what extent should they happen. Should some minor finical help be given or should the Government take control and run the company. Suggesting that the Government shouldn’t do anything doesn’t help out because the bailout will always fail is a copout. And just because in the past mistakes where made it doesn’t mean the Government shouldn’t try again.
And should homeowners’ debt be forgiven and should the market be propped up by the government and more importantly our tax dollars? Allowing the debt of homeowners be forgiven because of the harm it has caused is a double edge sword. On one hand it helps out the people that are in need. And on the other hand it could give the impression to people that they not need to worry about debt because they can be bailed out. If severe harm is caused by their actions, people and companies must be held accountable for what they have done. They shouldn’t be given a free ride by the government.
The harm that has been caused cannot just be whitewashed away because there is harm that has been caused to the American/World Economy. Banks and Corporation must be allowed to fail. Not everything should be bailed out. On the same thought just sitting by and doing nothing will not help us out of the self dug hole. There are times for bailouts and there are times for laissez-faire economics. The key is to not believing that each are the only way to react to a damaged economy. The both must be used and neither one is greater than the other.
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I believe government bailouts should be extremely limited to companies that have a major impact on the economy amd the people. For instance, with the Fannie and Freddie bailout, a non governmental plan would have immensely hurt the American people as these two lenders control about 50% of mortgage loans in the country. If these two companies were left alone, funds borrowed for mortgages in the future will be extremely hard to get and the interest rates charged would be unbelievably high. On the otherhand, huge companies that do not affect the vast majority of people should not get government bailouts as this defeats companies learning from misatkes made by management. In all, I believe government bailouts all depends on how much a companies financial distress is going to affect the major and common population of America.
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