Harry, I agree the idea of bailing out the foreign institutions is a terrible idea. If we are going to write the checks, let’s prop up our own banks and make them more powerful vis a via the world.
The problem is however that all of our prosperity the last 5-10 years is courtesy of foreign investors financing our national debt. And this new $700b in debt won’t be bought up by investors here. We don’t have the money.
Something tells me in the last 48 hours a number of central banks and foreign governments called up Hank and told him that if the plan only helps US banks, you can forget the world buying anymore treasuries.
I’d still though limit it to US Banks and take my chances for now.
UBS and the rest didn’t have any problem buying this stuff up when it looked like easy money. Let them sort it out, it’s really not our problem.
I see your point about foreign investment, but I think they’ll still buy our treasuries when it makes financial sense. They can’t not, really. When it comes down to money or politics, money will win.
I suppose there might be a meaningful threat of de-pegging to the dollar in some foreign markets. The rumbling has been there, and it might even make sense to do so objectively.
If we have to pay that price, then so be it. We can’t bail out foreign banks.
Have you seen this line from the proposal making the rounds ? “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
That’s the truly terrifying line. Though I have to wonder about its constitutionality.
If it doesn’t scare you with Paulson, think about it with Obama’s Treasure Secretary.