As most recurring news event, the crisis has started to bore me. I cannot help but bring attention to Joseph Stiglitz latest comment on the bailout still, published at the Economists’ Voice.
One reason I think Stiglitz’ views are interesting is that he argues how I did myself in a recent conversation: The bailout does not address the fundamental problem; all the bad loans. Instead, a rescue operation should help homeowners in trouble. According to Stiglitz, this could be done rather quickly and the measures he proposes would be a lot cheaper than bailing out Wall Street.
Earlier I wrote about the problem the managers of the bailout funds will face valuating the rotten assets, and a possible solution. As Stiglitz points out, paying a fair price for the bad loans will not fill the hole in the banks’ balance sheets. The solution of a decentralized bailout, thus, is clever, but it would work oposite to the overall goal with the bailout.
Stiglitz concludes that the American taxpayer will in all likelihood have to suffer. He goes on to ponder what only some of the bailout money could do; health care for children for example. Over on the Environmental Economics blog someone commented on what a billion dollars to each of 700 American universities could do to the education sector. In conclusion, Stiglitz does note think the (just voted through Congress) bailout is sufficient. It annoys, then, that he still think it makes sense to go ahead with the bailout. I beg to differ.