Ah the mea culpa. “If only they would let capitalism function,” says Nuriel Roubini. These pure market theorists are really a downer: as if an agentless capitalist system could exist; as if capitalism does not generate vast concentrations of capital which are too large to fail; and as if those who control such massive chunks of financial claims will not leverage that to their political and economic benefit.
Nuriel has it wrong: it is not socialism for the rich, it is the political economy of capitalism. Workers lose their pensions and health care benefits and investors get a bailout. The iron boot and the velvet glove: same as it ever was.
….As the Schumer letter correctly points out the collateral against this $51 billion loan is mostly toxic waste subprime garbage whose market value is now much lower than the face value of such mortgages; so $51 billion dollar of taxpayers’ money has been put at risk with garbage as collateral for it.
…..The lesson of this sad and sleazy episode is that when profits are privatized and losses are socialized we get sleaze capitalism and corporate welfare that becomes public bailout of reckless lenders. All this from a US administration that hypocritically praises every other day the virtues of private markets capitalism. For all of us who do truly believe in free market economies where a variety of public goods are provided by governments and the financial sector is properly supervised and regulated this is not a capitalist system but rather socialism for the rich.