Robert Reich’s Blog: The Bailout of All Bailouts is a Bad Idea

September 18th, 2008

I tuned into to Robert Reich’s blog recently, and it is currently one of my all-time favorite things on the Internet.  I like his segments on NPR as well.  As a Cabinet member under Bill Clinton, the man has the credentials to charge a bunch of money for his opinions.  It’s fantastic to see him offering them up for free instead.

Robert Reich’s Blog: The Bailout of All Bailouts is a Bad Idea

The post linked above lobs out a fascinating idea for a kind of mass-bankruptcy proceeding for every ailing bank on Wall Street, or perhaps a financial Truth and Reconcilation Committee proceeding. 

The idea is to bring out all the skeletons, wipe out the banks’ bad debt- and the equity of those who bought stock in the banks- and let them start fresh without putting US taxpayers on the hook for a super-massive bailout, BUT with improved disclosure and minimum capitalization rules.

Disclosure rules certainly need to evolve with the times, but for the record I’m not sure they are the main answer.  As my friend Sam put it, almost no one actually understands what a credit default swap really is.  As long as everyone was making money, understanding the mechanics didn’t seem that important.

All that said, Reich offers a lot of food for thought on a regular basis.  Definitely worth reading.

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