Back in October 2008, I was a member of a panel discussion hosted by the BYU Economics Department that was tasked with explaining different aspects of the financial crisis up to that point and answering questions from the audience. Each member of the panel, myself included, supported the government's role in bailing out U.S. banks and financial companies citing the systemic role they play in the world economy (see my post 1 and post 2). However, since the crisis began in October 2008, two of my colleagues have consistently made what I see as the only good argument against the TARP financial bailout program--the slippery slope costs will outweigh the systemic risk reduction benefits.
What began as a plan to rescue the ailing banks and financial firms that provide liquidity to the global market place (the TARP)--and without which the global economy would stall for some significant period of time--turned into a general helicopter drop of money to any kind of project that a state special interest group can get line-itemed into the current stimulus bill. So the slippery slope argument against the TARP is states that the benefits of the TARP in averting potential international financial disaster are far outweighed by the costs of opening the door to what is now looking like an irresistible political urge to borrow against the future in a big way in order to spend money on inefficient projects.
I am still sticking to my initial support of the government bailing out financial companies due to their role as intermediaries in the global economy. But my resolve is decreasing every day as I see the costs of the current stimuls bill mounting as it swirls around in Congress. We'll never know how bad the world economy would have suffered if we didn't bail out banks and insurance companies, but the slippery slope costs are turning out to be much more than I imagined.
To quote one of my colleagues at lunch today:
I am still sticking to my initial support of the government bailing out financial companies due to their role as intermediaries in the global economy. But my resolve is decreasing every day as I see the costs of the current stimuls bill mounting as it swirls around in Congress. We'll never know how bad the world economy would have suffered if we didn't bail out banks and insurance companies, but the slippery slope costs are turning out to be much more than I imagined.
To quote one of my colleagues at lunch today:
"It is amazing how quickly the pigs lined up at the trough. You'd think there would be more of a stigma to being the first one to pick a dead man's pockets."
