I'm not advocating this position but I was really taken by something a guest contributor to Politico's Arena wrote:
Goldman Sachs will die and so on and so forth. I tend to see it this way. The little guy is going to get run over by a steam roller anyway whether the billionaires have their 700 billion or not. Why, after all do I particularly care if Goldman Sachs dies? I don't.
The comments continue:
I see this as an opportunity to remake our entire economic situation. Wall Street has actually been working against the good of the people for quite some time. Maybe it's time for them to collapse. Maybe it's time for people to start saving money instead of spending it. Maybe it's time for big corporations to release their stranglehold on this country. We can then begin to get rid of the oil addiction, and stop waging wars to rob others of their resources. In order to get rid of oil addiction the oil companies need to go out of business. The banks need to work for the American people--not against us. Banks need to charge fair interest rates not usurious ones. Banks need to stop preying on people like a pack of mafioso. Big companies need to be trust busted. If they are so big that they rock the economy, break them down and fire all the CEOs. Bring back small family businesses and small family farms. Dump the bigwigs, Wall Street fat cats out, and rework America for the majority of working folks not the few billionaires.
I thought these comments were a fascinating one, and also interesting that it was made by someone who identifies himself as a "therapist" - and not just some talking head we're always hearing from. The question it raises is one I'm finding myself mulling over, even as I dread what might happen if this were to happen:
Is the crisis a game changer in a potentially positive way if only we are brave enough not to do anything?
I have to say I honestly don't know, and it's obviously bothering me enough that I'm up right now writing this rather than going to sleep (which I badly need . . . so I thought I'd share it with all of your night owls out there).
Before I beat myself up for this cop out, I have to say no one else knows either. Everywhere I look, there is a lot disagreement over what will happen if we do nothing.
Look at the Washington Post.
First, here's Steven Pearlstein, their "business columnist."
First, stop fixating on Wall Street executives -- there will be time to deal with them later. Even if you clawed back every dime they made over the past decade, it would come to several billions of dollars. That's a rounding error compared with the size of the financial problem we're facing here.
Second, we need to act quickly. The financial situation is now downright scary. Don't look at the stock market -- that's not where the problem is. The problem is in the credit markets, which are quickly freezing. I won't bore you with technical indicators like Libor and Treasury swap spreads, but if you talk to people who work these markets every day, as I have, they report that the money markets are in worse shape than they were last August, or even during the currency crises of 1998.
And then there is James Galbraith.
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.
Is this bailout still necessary?
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.
Both these guys seems to be dancing around the question, what happens if we do nothing? The first accepts Bush, Paulson, and Bernanke at their word and the second not so much. The sky is falling. Maybe it isn't.
This is obviously a crisis of authority - not a shocker, right? We don't believe anyone anymore, and this goes quadruple for Bush, who has a nasty tendency to cry wolf. So this time, we have to figure out if we're the villagers in the story - is there a real wolf or is the boy having another bit of fun at our expense?
SO, what I like about the comment I quoted at the start of this diary is it asks us to consider the possibility that in fact there is a wolf, a big scary one, one that's going to bring down our financial system and many of the dreams and fantasies we all have attached to it. You know the ones. Dreams of security, wealth, social mobility, safe homes, jobs that we can rely on, etc. etc. And on the other side of these dreams and fantasies are the nightmares which the phrase "Great Depression" that's been bandied around so much are meant explicitly to evoke.
Really, though, you don't have to look that far into the past. Just look at what happened to Argentina a while back when their economy went into a tailspin. The middle class was wiped out. There were factories in good working condition but no demand for goods and no jobs as a result. And so on and so forth.
What if this nightmare turns out not to be so bad after all. All of us at one time or another have probably railed against the greed that seems to dominate our lives, the consumer lust that seems to leave us in a constant state of distraction, the enormous social inequalities, wars, and environmental crises that grease our economic systems, and for the most part we all seem to dislike - at least some of the time - the world that is resulting.
Why not let it all slide away?
Why not give up on big business and make way for small enterprises that value small farms over big agribusiness, sustainable communities rooted more (by necessity) to place, and import substitutions that take the place of exporting jobs overseas and wreaking havoc in those overseas places in the process?
If the wolf does come to devour the economy, might a more sane economy take its place?
And if it doesn't come after all, well we're just plain stuck where we started, aren't we? Even the advocates of a bailout admit it's still going to sting a lot (but probably, maybe less if we don't do anything).
Or, as I personally suspect is more likely the case, does this ignore the real and very serious pain that is waiting for us if we don't do anything, and all of these musings are just pie-in-the-sky daydreaming that's too plain dumb to see the predatory shadows lurking in the forest?
[Update] Great comment below about the poll being BS. It shouldn't be whether we should or shouldn't do something. The question needs to ask what should we do? I can certainly think of A LOT better ways to spend X billions of dollars, including simply helping homeowners more with their mortgages so that those loans remain good investments. In my defense, though, no one is asking me (or any of us) what to do with this kind of cash. It's really an either/or kind of question as it's being posed to the public.