The first reaction I had when hearing about the $700 billion bailout plan was that it's a distasteful but probably necessary response to the current financial crisis. However, the more I think and hear about it, the more I begin to think it could end up being a disaster.
With the incredible amount of money involved and the total lack of oversight that is being asked for, it sounds like we're going to end up with all the disadvantages of both capitalism and communism while not enjoying any of the benefits. It will be used to prop up failing corporations, which takes away the competition factor of capitalism, and at the same time it will only be helping corporations directly, which takes away the equality of communism. And with the lack of oversight, it might in fact be rewarding bad corporate policies.
And I fear that it might cause a loss of confidence in the ability of the U.S. government to pay its debts, which could cause the federal government to go bankrupt. This would be a much huger disaster than the current crisis. And it might very well happen if the federal government continues to hemorrhage as it currently is and if the corporations propped up by the bailout are not able to eventually return a handsome profit for paying back the loans and equities. It doesn't make me feel any better that the tax plans from both presidential candidates will still result in large deficits, although McCain's plan would be significantly worse.
I can't quite find myself unequivocally blaming the corporate officers on Wall Street, however. I have a suspicion that they may have had no choice. They could have been quite aware of the long-term risks, but they may have not been able to afford to not make the risky investments they had without being outpaced by their competition. In other words, it could be a real world example of the Prisoner's Dilemma, where they may have felt they had to risk a financial meltdown in the long-term in order to avoid certain doom in the short-term.
If I'm anywhere close to the mark, then the blame for the current financial crisis would lie squarely on the government, which failed to provide a proper regulatory environment that would have prevented corporations from choosing short-term benefits resulting in long-term disaster. On the other hand, the corporate officers on Wall Street may not have been aware of what could happen, in which case I wonder why anyone would pay them to do anything. If a layman like me could have foreseen a downturn, although not one as severe as what we actually have right now, professionals like them should have very well known what would happen. Sometimes I'm not quite sure about this, though, considering that we sometimes hear ridiculous things coming out of their mouths.
As a layman who isn't even particularly interested in economics, I think I've blabbered enough about it for now. I'll just finish with the off the cuff thought that the proposed bailout for corporations is almost five times larger than the economic stimulus package that was for ordinary citizens.