LOL

Just because a skeptic is interested in politics or economics doesn’t make the subject amenable to skepticism. I point to this long string of grossly diverse opinions as evidence that skeptical addressment of topics that are essentially opinion rather than fact driven is a waste of time.

While I may agree with the overall sentiment, I too must quibble with the claim that “…only the people who produce the wealth can properly assess how best to risk it in future investments.” As other have noted “the people who produce the wealth” contextually seems to refer to investors.

I certainly agree that those exposed to risk have an incentive to mitigate it, but the link from incentive to ability is only indirect. In just the previous paragraph, Shermer writes, “potential home buyers and investors mistakenly assumed that the increasing trend line in housing prices would continue unabated indefinitely.”

On the flip side, how can one say that disinterested individuals are necessarily unqualified to assess risk and reward? It’s obvious that regulators and research analysts cannot be wrong 100% of the time.

Writing something such as, “Everything being equal, a free market operates best when risk is tied to reward,” does not have the same rhetorical punch, but it would be closer to the truth.

Yes the Bailout is a Government fix, but government caused the problem as it usually does with its typical “unintended” consequences of poor regulation, so it’s only proper that Government fixes the problem by re-capitalizing banks that mark to Market forced to sell even their good assets. Look at it like this, just imagine if that home you bought 3 or 4 yrs ago and is now underwater (you owe more than it’s worth) and the Government forced you to mark to market to the same LTV you had when you purchased the home, and that would cost you thousands or force you to sell in a down market. Smart money says that you hold the property and in 10 yrs you’ll be fine, because selling now “locks-in” the loss.

Yes sub prime mortgage-backed securities were a bad idea and those who bought them should have lost money, but mark-to-market and artificially low interest rates threw Napalm on what should have been a small fire. It caused securities that should be worth 70-80 cents on the dollar to sell at 10-20 cents on the dollar. So instead of firms just holding the securities to maturity and have 20% losses (or perhaps none!), they were forced to sell and lose 80% or 90%. It shocks me that this issue isn’t being discussed as part of the bailout plan.

the only rational way i can see to look at this issue is this: the costs to the taxpayer are absolutely obvious. the benefits to the parties who brought us to this state of affairs are likewise obvious. it is reasonable to say “it is a crisis, we don’t have the luxury of punishing the guilty parties”, but the government is _absolutely_ obliged to make a convincing case that the cure benefits those of us who will be paying for it. the claim has been repeated often enough, but not one shred of evidence or clear reasoning has been advanced.