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I saw an excellent interview with Federal Reserve Chariman Ben Bernanke on 60 Minutes last night. Aside from being impressed with Mr. Bernanke, I think he made two very good points that seem to be lost on a lot of Americans who are so upset "our money" is being used to bailout rich people, crooks and banks that deserve to fail.
The first was a great analogy. Mr. Bernanke said in response to the idea that we should just allow these institutions to fail because they deserve to fail. I paraphrase:
What if your neighbor was smoking in bed and set his house on fire? The house is burning. Do you allow his house to burn down? He was reckless and caused his own problem. But, you live in a wooden house right next door? In fact, all the houses in your neighborhood are wooden. You call the fire department, put out the flame and worry about asigning blame and meting out punishment later."
I completely agree with the sentiment expressed by this analogy. Not being a person who is all that into punishment anyway, I struggle the concept of allowing bad things to happen to people because they "deserve it". But, setting that aside, allowing many of these institutions to fail is, as I've said earlier, cutting off your nose to spite your face. It doesn't just harm the guy who was smoking in bed, it threatens our own homes. We must do what's best for all of us regardless of what they "deserve.".
Secondly, Mr. Bernanke addressed the sentiment that we are spending tax dollars to bail out banks. As he put it, the banks have accounts with the Fed (which is the source of money-they're the guys who print it). The Fed doesn't have to borrow money to put it into their accounts. All they have to do is magically make the money by entering a few keystrokes. Now, we all know from Econ 101 that you don't want to keep doing this forever. But, in a time when banks are about to go under and there's no risk of inflation, it makes sense to me to do this. Whether you agree with that or not, it is not spending tax payers money when the Fed injects more money into the banking system. That is simply false.
If you didn't catch the interview, I recommend it.