Petition to congress of over 150 economist's who say bailout is wrong.

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Acemoglu Daron (Massachussets Institute of Technology) Adler Michael (Columbia University) Admati Anat R. (Stanford University) Alexis Marcus (Northwestern University) Alvarez Fernando (University of Chicago) Andersen Torben (Northwestern University) Baliga Sandeep (Northwestern University) Banerjee Abhijit V. (Massachussets Institute of Technology) Barankay Iwan (University of Pennsylvania) Barry Brian (University of Chicago) Bartkus James R. (Xavier University of Louisiana) Becker Charles M. (Duke University) Becker Robert A. (Indiana University) Beim David (Columbia University) Berk Jonathan (Stanford University) Bisin Alberto (New York University) Bittlingmayer George (University of Kansas) Boldrin Michele (Washington University) Brooks Taggert J. (University of Wisconsin) Brynjolfsson Erik (Massachusetts Institute of Technology) Buera Francisco J. (UCLA) Camp Mary Elizabeth (Indiana University) Carmel Jonathan (University of Michigan) Carroll Christopher (Johns Hopkins University) Cassar Gavin (University of Pennsylvania) Chaney Thomas (University of Chicago) Chari Varadarajan V. (University of Minnesota) Chauvin Keith W. (University of Kansas) Chintagunta Pradeep K. (University of Chicago) Christiano Lawrence J. (Northwestern University) Cochrane John (University of Chicago) Coleman John (Duke University) Constantinides George M. (University of Chicago) Crain Robert (UC Berkeley) Culp Christopher (University of Chicago) Da Zhi (University of Notre Dame) Davis Morris (University of Wisconsin) De Marzo Peter (Stanford University) Dubé Jean-Pierre H. (University of Chicago) Edlin Aaron (UC Berkeley) Eichenbaum Martin (Northwestern University) Ely Jeffrey (Northwestern University) Eraslan Hülya K. K.(Johns Hopkins University) Faulhaber Gerald (University of Pennsylvania) Feldmann Sven (University of Melbourne) Fernandez-Villaverde Jesus (University of Pennsylvania) Fohlin Caroline (Johns Hopkins University) Fox Jeremy T. (University of Chicago) Frank Murray Z.(University of Minnesota) Frenzen Jonathan (University of Chicago) Fuchs William (University of Chicago) Fudenberg Drew (Harvard University) Gabaix Xavier (New York University) Gao Paul (Notre Dame University) Garicano Luis (University of Chicago) Gerakos Joseph J. (University of Chicago) Gibbs Michael (University of Chicago) Glomm Gerhard (Indiana University) Goettler Ron (University of Chicago) Goldin Claudia (Harvard University) Gordon Robert J. (Northwestern University) Greenstone Michael (Massachusetts Institute of Technology) Guadalupe Maria (Columbia University) Guerrieri Veronica (University of Chicago) Hagerty Kathleen (Northwestern University) Hamada Robert S. (University of Chicago) Hansen Lars (University of Chicago) Harris Milton (University of Chicago) Hart Oliver (Harvard University) Hazlett Thomas W. (George Mason University) Heaton John (University of Chicago) Heckman James (University of Chicago - Nobel Laureate) Henderson David R. (Hoover Institution) Henisz, Witold (University of Pennsylvania) Hertzberg Andrew (Columbia University) Hite Gailen (Columbia University) Hitsch Günter J. (University of Chicago) Hodrick Robert J. (Columbia University) Hopenhayn Hugo (UCLA) Hurst Erik (University of Chicago) Imrohoroglu Ayse (University of Southern California) Isakson Hans (University of Northern Iowa) Israel Ronen (London Business School) Jaffee Dwight M. (UC Berkeley) Jagannathan Ravi (Northwestern University) Jenter Dirk (Stanford University) Jones Charles M. (Columbia Business School) Kaboski Joseph P. (Ohio State University) Kahn Matthew (UCLA) Kaplan Ethan (Stockholm University) Karolyi, Andrew (Ohio State University) Kashyap Anil (University of Chicago) Keim Donald B (University of Pennsylvania) Ketkar Suhas L (Vanderbilt University) Kiesling Lynne (Northwestern University) Klenow Pete (Stanford University) Koch Paul (University of Kansas) Kocherlakota Narayana (University of Minnesota) Koijen Ralph S.J. (University of Chicago) Kondo Jiro (Northwestern University) Korteweg Arthur (Stanford University) Kortum Samuel (University of Chicago) Krueger Dirk (University of Pennsylvania) Ledesma Patricia (Northwestern University) Lee Lung-fei (Ohio State University) Leeper Eric M. (Indiana University) Leuz Christian (University of Chicago) Levine David I.(UC Berkeley) Levine David K.(Washington University) Levy David M. (George Mason University) Linnainmaa Juhani (University of Chicago) Lott John R. Jr. (University of Maryland) Lucas Robert (University of Chicago - Nobel Laureate) Luttmer Erzo G.J. (University of Minnesota) Manski Charles F. (Northwestern University) Martin Ian (Stanford University) Mayer Christopher (Columbia University) Mazzeo Michael (Northwestern University) McDonald Robert (Northwestern University) Meadow Scott F. (University of Chicago) Mehra Rajnish (UC Santa Barbara) Mian Atif (University of Chicago) Middlebrook Art (University of Chicago) Miguel Edward (UC Berkeley) Miravete Eugenio J. (University of Texas at Austin) Miron Jeffrey (Harvard University) Moretti Enrico (UC Berkeley) Moriguchi Chiaki (Northwestern University) Moro Andrea (Vanderbilt University) Morse Adair (University of Chicago) Mortensen Dale T. (Northwestern University) Mortimer Julie Holland (Harvard University) Muralidharan Karthik (UC San Diego) Nanda Dhananjay (University of Miami) Nevo Aviv (Northwestern University) Ohanian Lee (UCLA) Pagliari Joseph (University of Chicago) Papanikolaou Dimitris (Northwestern University) Parker Jonathan (Northwestern University) Paul Evans (Ohio State University) Pejovich Svetozar (Steve) (Texas A&M University) Peltzman Sam (University of Chicago) Perri Fabrizio (University of Minnesota) Phelan Christopher (University of Minnesota) Piazzesi Monika (Stanford University) Piskorski Tomasz (Columbia University) Rampini Adriano (Duke University) Reagan Patricia (Ohio State University) Reich Michael (UC Berkeley) Reuben Ernesto (Northwestern University) Roberts Michael (University of Pennsylvania) Robinson David (Duke University) Rogers Michele (Northwestern University) Rotella Elyce (Indiana University) Ruud Paul (Vassar College) Safford Sean (University of Chicago) Sandbu Martin E. (University of Pennsylvania) Sapienza Paola (Northwestern University) Savor Pavel (University of Pennsylvania) Scharfstein David (Harvard University) Seim Katja (University of Pennsylvania) Seru Amit (University of Chicago) Shang-Jin Wei (Columbia University) Shimer Robert (University of Chicago) Shore Stephen H. (Johns Hopkins University) Siegel Ron (Northwestern University) Smith David C. (University of Virginia) Smith Vernon L.(Chapman University- Nobel Laureate) Sorensen Morten (Columbia University) Spiegel Matthew (Yale University) Stevenson Betsey (University of Pennsylvania) Stokey Nancy (University of Chicago) Strahan Philip (Boston College) Strebulaev Ilya (Stanford University) Sufi Amir (University of Chicago) Tabarrok Alex (George Mason University) Taylor Alan M. (UC Davis) Thompson Tim (Northwestern University) Tschoegl Adrian E. (University of Pennsylvania) Uhlig Harald (University of Chicago) Ulrich, Maxim (Columbia University) Van Buskirk Andrew (University of Chicago) Veronesi Pietro (University of Chicago) Vissing-Jorgensen Annette (Northwestern University) Wacziarg Romain (UCLA) Weill Pierre-Olivier (UCLA) Williamson Samuel H. (Miami University) Witte Mark (Northwestern University) Wolfers Justin (University of Pennsylvania) Woutersen Tiemen (Johns Hopkins University) Zingales Luigi (University of Chicago) Zitzewitz Eric (Dartmouth College)

The plan is a subsidy to investors at taxpayers’ expense.

Earth to Economists: The taxpayers ARE investors! That's why they stand to lose a bundle if investments blow up across the board.

And this silly petition is no more a "consensus of economists" than the global warming alarmists' press releases are a "consensus of scientists".

"If you bail out people who could not make payments, you just DELAY the problem-
they STILL CAN’T MAKE THE PAYMENTS"

Right, so let nature take its course!
Failure and loss is a part of life.
I don't believe for an instant that the entire economy would collapse over this.
Lots of people will get burned badly, and they deserve to get burned.
I just pray that the FBI does a good job of uncovering the culprits that need prosecution.

Maybe we can build a prison just for them.

This is a great article, because it goes to the heart of a very complex problem.

I agree entirely with two of the 'three fatal flaws'; I have my own major fatal flaw with #1, however:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses..."

This avoids the essential discussion about who is the "taxpayer" and who is the "investor." They are not mutually exclusive.
In the thousands of words I've seen about the problem, there has been no attempt (that I know of) to determine how much (what percentage) of the "investment", and subsequent losses, are owned by individuals indirectly, through funds which are part of their 401(k) and other retirement vehicles.

If taxpayers are asked to "punish" the dishonest and opportunistic investors, they should clearly understand to what extent they are punishing themselves.

If there is an attempt to identify the guilty parties and restitution is part of the "solution", it becomes a different discussion altogether.

Not mentioned, but clearly possible, is that if the solution is rushed and badly reasoned out, a second wave of crooks will create the problem all over again.
Nothing attacts the criminals like almost a trillion$ just waiting to be plucked...

>> My gut tells me that unless the solution starts with THEM, they will not likely consider it—excessive pride, arrogance, and the excesses of power have all worked their ill on the majority of those who make up the current legislative body.

Of course — as compared to the astounding humility of 150 point-headed tenured economics professors at liberal institutions.

Are these the same economist who said NASDAQ was justified by the “new ecnonomy”, there was no housing bubble, and the foreign economies had decoupled from the US economy?

Were these among those geniuses?

I could post a list of 900 scientists who concluded man was responsible for global warming. Does that make it true?

http://amateureconblog.blogspot.com/2008/09/sowell-williams-and-stossel-on-bailout.html

Sowell, Williams, and Stossel on the Bailout

John Stossel is against the bailout.

Thomas Sowell seems to be for the bailout, but not the Democratic additions like bailing out individual homeowners and keeping them in homes with bad loans.

I can’t find Williams’s position on the bailout. (I love Walther Williams. He is such a clear, no BS, straight shooter with oodles of brains.)

Considering the shape we’re in economists don’t impress me. Our best economic brains are in government, wall street, main street and college street and look at the mess we have. It’s similar to the fact that some of our best legal minds are in congress passing our laws and look where we’re at in that regard.

>> You obviously are ignoring Gingrich’s proposal...which as a politician I’m sure he didn’t come up with on his own...

My post had nothing to do with Gingrich’s proposal. I haven’t read Gingrich’s proposal.

I was referencing these 150 economists lack of a proposal. I’m not sure why we should take these people any more seriously than the scientists who signed on to global warming, or the professors who signed petitions against the war in Iraq.

Those who can, do. Those who can’t, teach.....or run for public office.........

Bill Gates is a good example - walked away from the arrogance of Harvard to actually do something. Edward Gibbon is another - went to Oxford for eighteen months, financed by a middle class merchant family, and in his own words found the dons so pompous he walked away to write a real history.

Formal college education is overrated, and would be especially so if it weren't around now to simply compensate for the abyss of the NEA public school system.

And of course there are the US Senators.

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