After reading many diaries and comments about the various "bailouts," there seems to be a consensus of outrage about the whole topic. Even though people are upset about Big 3 begging (along with their complete disregard for public perception), what is truly pissing them off are the bailouts of Wall Street financial institutions. I think I finally understand why... come join me on the the other side.
The simple truth of the matter is people understand at a visceral level the difference between real industry and mere paper shuffling. At the core, all of our financial institutions are intermediaries that merely facilitate productive activities that produce real stuff that people want and need. Are they important? In a word... yes. Modern civilization would not be able to function at its current level without these intermediaries. This is not to say we couldn't do without them if we were willing to devolve our current technological civilization to back to an agrarian society. Unfortunately, the consequences would be a prodigious die off of humanity as the human population decreased to something that could be sustained without massive technological support systems. Even so, what has become clear to me is the imbalance in the rewards given to "paper pushers" compared to personal and corporate industry.
One way to look at this is using Maslow's Hierarchy of Needs. Activities that provide goods and services that meet basic survival needs - air, water, food, shelter, warmth, etc. - can be considered primary. Activities that make it more efficient and cost effective to produce these goods are secondary. For example, capital institutions are important because they are mechanisms by which we can redirect our surplus resources (savings) to government/businesses (stocks/bonds) and consumers (loans/credit cards). These institutions don't actually produce anything - they just help us put our money to work. These goods would still get produced, just not at the cost, quality, and quantity we take for granted in modern society.
Insurance institutions, on the other hand, are all about the second level of Maslow's hierarchy - protection needs. Having obtained the basics of life, we now seek to reduce the risk of losing what we have - either directly (fire, flood, theft, etc.) or indirectly via the loss of life, health, or employment. The insurance industry's product is risk mitigation, but they profit the most when they don't pay. Their interest lies in getting as many people as possible to give them money for the promise of protection if certain events occur. In any case, the insurance industry doesn't really produce anything... they are just a means by which risk is pooled over a group. Again, this is not to say the insurance industry isn't important... it is. The problem that I, and many others have, is why should we pay for failure? These institutions have a purpose and they failed in their basic mission through greed and mismanagement.
The question we are asking ourselves is if we are going to inject public funds into the market, why not invest in those institutions that didn't fall victim to the culture of greed and mismanagement that seems pervasive at the top of these institutions. Why not provide funds to institutions that actually make stuff we need and want while doing so with innovative thinking and/or thriftiness. Why give money to whole industries that are nothing more than leeches in the first place. If the government is going to be the lender and insurer of last resort in the first place, why not set it up that way? I can hear the capitalists scream already. "Government is inherently inefficient - capitalism rewards excellence." they'll cry. Not true - capitalism rewards greed, and in their greed, the management of these institutions threw out prudence and any sense of fiduciary responsibility in the pursuit of their own self interests. They gambled, lost, and now want to be paid for conning us into covering their losses.
So now I return to my premise - we, the people, are mad as hell because the people and institutions we trusted to protect us have failed... and in failing, still want their piece of the action while not producing - or providing - what they promised. They over-promised to back their wild gambles and now we get to cover their markers. Anyway, here's an idea. Let's give the bulk of any bailout money to productive businesses and let the secondary service providers who are still around make their legitimate revenue off the resulting activity. The others can go to hell, and if that isn't a viable alternative, sever the golden parachutes and fire everyone making over 200k. At least then, the people who created the problem get to share in the consequences.
The bottom line is this, if any institution is too big to be allowed to fail, let it fail anyway. It will hurt, but by providing governmental supports primarily to the bottom of the production pyramid, demand for secondary services will eventually bring a multitude of providers back into the market along with a salubrious drubbing to instill some caution in their future dealings. Paying off the moguls of the insurance and investment mega-conglomerates that got us into this mess is paying Danegeld to the Dane. The historical lessons of that policy are, or should be, well known. Let's cut our losses, take what funds we have left, and invest them where they'll do the most good. By expanding and strengthening our capacity to provide the basics of adequate nutritious food, affordable housing, excellent education opportunities, fair wages and employment, and universal access to healthcare for all of us first, we will create a stronger workforce and an expanded entrepreneurial class. Supporting dinosaurs will not get us where we need to go. 'Nough said.
Peace and Prosperity from the Dancin' Man