More on the bailout

Some interesting follow-up links:

A contentious discussion on the crisis between Economics Profs. Reich and Henderson, the former a Clintonite and the latter a Reaganite:
http://www.kqed.org/epArchive/R810060900 (mp3 should be available by Mon. evening or Tues.)

Lehman was lining executives' pockets while begging Uncle Sam for a bailout and cancelling employee severance:
http://thehill.com/leading-the-news/waxman-slams-lehman-brothers-on-executive-pay-2008-10-06.html
http://www.nypost.com/seven/10042008/news/regionalnews/lehman_staff_gets_the_shaft_in_severance_132071.htm

Is the "freezing up of credit markets" exaggerated?
http://www.forbes.com/opinions/2008/09/28/bernanke-bailout-crisis-oped-cx_drh_0928henderson.html

Some justifications for this Wall Street rescue is (1) to increase credit liquidity and (2) to improve depositor confidence to prevent a 1930-like bank run. But...

According to data provided by the St. Louis Federal Reserve Bank, lending by banks for consumer loans and commercial and industrial loans was at an all-time high on Aug. 1. Bank lending for mortgages was only one-quarter of 1% below its level on May 1, when it was at an all-time high. [Forbes.com]

I know people and small businesses are having some problems maintaining or increasing their lines of credit, but obviously many others out there are still lending and borrowing normally. And in response to the Depression, the FDIC has insured accounts up to $100,000 for years (now $250,000), which covers 99% of us. Yes I'm sure some irrational panickers will still withdraw their savings amidst this crisis, but it's very unlikely to see a repeat of 1930, except for smaller cowboy banks like IndyMac that were already on the rocks. But averting Wall Street sell-offs by huge fund managers and high-roller investors is a different, and tougher, problem (as we've seen from >5% losses by the Dow and foreign markets recently, even after the passing of the rescue bill).

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Well, I guess a major lesson learned again is the importance of information. Economics and markets won't work, or won't be fair at least, with imbalanced or highly defficient information. I would hope that investors can do a better job in actually knowing and having accountability for what the hell they're buying and selling, especially risky speculations like higher-order derivatives. Maybe regulation plays a role in that, to parse through and elucidate all these exotic investment vehicles. Maybe regulation will never keep the lid on ever evolving and multiplying casino economics, but at least we can expose bad paper for what it is, and not rescue morons who ignore the warnings and still shoot themselves in the foot.