Bailout Rejected

This blogger has tried to make sense of the financial crisis and the rescue package that US Treasury and the Federal Reserve Bank proposed to congress. Now that the US House of Representatives rejected the proposal containing the rescue package, what followed are recriminations between the parties and the attempts to blame either of the presidential candidates.

As I tried to make sense of the crisis, I find that there is no more informed and clear thinker than Paul Krugman. First because he dedicated a large part of his early career to studying these cycles and has written a number of accessible books such as this and secondly because there's immense argument with the commentariat infusing ideology and biases into definitions on what the problem is.

One finds evidence of the diversity of these views from professional economists themselves as this page on the reason site shows. While answering the same four questions, it is clear that there's a bit more agreement and coherence on the causes than the appropriate solutions in addition to the utility value of the Paulson-Bernanke Plan.

Besides the clarity of Krugman's thinking on this matter, this short article by David Leonhardt of the NYT makes lots of sense of the convoluted genesis and proposed solutions. As he states, the package will remain controversial because of the mixture of the real objectives with other issues will make the plan internally inconsistent.

In spite of my reluctance to accept government interference in markets and the support for the market to be allowed to complete the decimation of uncompetitive firms, i think that the possibility of contagion and further harm is real and calculated assistance to restore lending is important to ease the liquidity trap.