The failed mortgages are only part of the story. Unfortunately, the mortgages resulted in investment derivatives in which many banks and investment firms poured money. The damage could very well be far worse than many think.
Philosophically, I am opposed to a bailout and the accompanying government meddling. As a practical matter, I think the risks go well beyond our own economy, although we will get hit quite hard.
If the banking industry can't make ends meet, then let them fold. Maybe someone new can do the job correctly. The main problem right now is simply there is no accountability anywhere in this country. They want to stop CEO's from making huge amounts of money if they get bailout money--good. Now add those who profitted from this-the stockholders cannot make huge amounts of money. Make this backdated for the last five years. That will stop the problems from happening again.
Bolaji, thanks for writing this important article. There's a lot that you have exactly right.
With respect, you're factually mistaken on whether the government will be able to recoup the $700 billion, never mind with a profit.
The details are subtle but incredibly important (and important for people to understand): the government will NOT simply accept the assets at the price currently in the books of the distressed lenders. One of the questions holding up the debate is: how deep should the write-down be?
It is unlikely that the taxpayers will recoup the entire amount; the RTC of the late nineties ended up spending about $90 billion for failed savings and loan banks; this bill will be larger.
But probably not $700 billion.
I've written more about this on my blog: peterlevin.wordpress.com
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