As banks implode in rapid succession and Senators and Congressmen on Capitol Hill debate an emergency bailout the little man has worries of his own and a burning question: How can it be that the ailing finance sector gets subsidized with 700 billion while his mortgage rates are allowed to gnaw away his livelihood?
Economists argue that this injection of capital is necessary to prevent the crisis from causing a meltdown of the entire economy and thus the destruction of everyone’s welfare. Whether or not the bailout is the right measure is a question that divides experts and parties alike. Whereas Democrats pledge to vote for subsidies on the condition of a reform of the markets Republicans are split. Conservative Republicans especially are reluctant to refloat banks using the taxpayer’s money.
Financial support may save the US economy this time. In the long run it doesn’t change the fact that this system of capital markets is no longer sustainable. It simply does not reward achievement. Nor does it promote long term economic activity. It is not good products, satisfied customers or employees that decide but greed and the pursuit of the fast buck. Executives have been receiving million dollar salaries for moving jobs across the border, stripping companies of their assets and selling them off or merging them at a bargain. Ordinary citizens depositing their savings in private equity and 401k funds were put in the role of shareholders with ensuing consequences.
It also wasn’t exactly helpful that the USA have curbed bank supervision and safeguards in recent years. Suddenly everyone was deemed credit worthy, the most reckless transactions sanctioned. The time has come to rethink the system of financial markets. Tighter bank supervision, a restrained approach to granting loans an the introduction of the Tobin tax on profits of short term speculation can help to change the market from a roulette table back to it’s intended function: a marketplace for investors.
