American Proscenium

Too Big To Bail

Treasury Secretary Timothy Geithner boasted on December 16 that 2008’s $700 billion bailout of an assortment of private enterprises would ultimately cost taxpayers less than congressional analysts had predicted.  The green eyeshades had calculated that the enormous wealth transfer would end up docking us taxpayers a mere $25 billion.  Without providing further detail, the secretary scoffed at the congressional bean counters’ estimates: “They are too high, in my judgment.  Ultimately they’ll be lower.”

Geithner continued his victory lap in front of his congressional inquisitors: This federal largesse “will rank as one of the most effective crisis-response programs ever implemented.”  And the government’s unconstitutional investment forays—its purchases of General Motors and insurance giant AIG—“will show a positive return.”  Now we can all relax, comforted that the country’s financial infrastructure “is in a much stronger position than it was before the crisis.”

For the time being, the U.S. financial system might be healthier than it was in September 2008 when Lehman Brothers dissolved, the commercial paper market froze, and stocks plunged.  It would be hard to surpass 2008’s brush with financial death.  However, the federal government rode to the rescue as the markets burned because regulators deemed certain private...

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