Opinion: Letter
It’s the economy, stupid
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I am thoroughly stunned at the complete lack of mention about the Fannie Mae and Freddie Mac bailout in the Herald these past two days. The consequences of the bailout are enormous for people in the business world as well as for regular taxpayers and people who are struggling with their mortgages. Of course, it is very interesting to know every detail about which candidate or former candidate stopped in what town this week, but what do you think these candidates will be fielding questions about in their upcoming stops? The left and the right have two very differing opinions on what should be done with the restructuring of these two mortgage giants (who owned over 50 percent of those subprime loans we have been hearing so much about), and whichever candidate wins in November will no doubt play a big role in deciding whether the two companies are returned to what they were before the bailout (the conventional view of the left) or whether the
companies will be made “smaller and smarter” (Sarah Palin’s view). The former executives of these companies stand to gain combined severance packages of around $24 million, and the companies themselves could possibly receive huge tax breaks from the IRS in order to support the bailout. I know there are enough anti-big-business people in this city to think that some would at least appreciate the details of the bailout.
And last, but certainly not least, what about the “moral
hazard” that many, including Alan Greenspan, have warned about since the
bailout of the hedge fund Long-Term Capital in 1998 and through the bailout of
Bear Stearns earlier this year? If the government continues to bail out these
giant corporations many view to be too large to fail, there will be no
incentive for these companies to manage their downside risk. The bailout safety
net could tempt other companies to take excessive risk. This is an issue that
will play a significant role as major American automakers Ford, GM and Chrysler
lobby for government loans to finance the continued development of
fuel-efficient vehicles. Because the failures in
I am sincerely disappointed in the Herald for somehow managing to consider this story non-existent.
Taylor Paul
Senior, accounting
paul2@wisc.edu
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I applaud Taylor for writing to the editor about this because its also been a bit of concern for me since I know most students on this campus aren’t checking reuters and cnn regularly. Lets get a story tomorrow on Lehman brothers or merril lynch or AIG. AIG is one of the biggest insurers in the world and the number one in this country. All of these have fallen n tough times and are dramatically changing the worldwide business landscape. Students need to know these things!
yawn