Economics - General

Why Bush and Paulson are Wrong

President Bush’s speech tonight urged Americans to side with the Bush-Bernanke-Paulson worldview that a bailout is the only option.  Is it the only option?

Luigi Zingales believes Henry Paulson’s decision to bail out Wall Street is a mistake.  Most economists agree that the government won’t get a “deal” when negotiating the price of risky assets.

“In a negotiation between a government official and banker with a bonus at risk, who will have more clout in determining the price?  The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich–at the taxpayers expense.”  

Zingales continues: “Do we want to live in a system where profits are private, but losses are socialized?”