Observations on the world today.

Saturday, November 22, 2008

Strange Dichotomy 

Here's an observation. As we watch this financial fiasco unfold, I am struck by two opposed ideas which I am not hearing anyone address. Some of the failing smaller banks are being swallowed up in buyouts by larger banks and institutions. Meanwhile, the largest failing institutions are being given bailouts because they are too large to allow them to fail without damaging the economy. However, if the only way to prevent failure at a catostrophic level is to infuse money into larger institutions, is it not countr-intuitive to allow them to become even larger still? Shouldn't we ( as part of the bailout) be blocking buyouts and takeovers and maybe even breaking up some of the pseudo-monopolies which already exist?

If, eventually, all of the banks wind up being three or four mega-banks, that will be one de facto national bank which we can never afford to allow it to go down. The US car industry is a perfect analog. Years ago, they stifled all competition until there were only three of them left, and those three are now acting as one body to plead with congress to bail them out so the entire industry doesn't go under.

The bailouts may be needed, not because we feel sorry for the corporations, but rather for the overwhelming magnitude of damage their failure will mean to their employees - the common man. But the very reason they have so many common men in their employ at all is that they said screw the common man as they built their empires.

Make breaking up their monopolies a central part of any bailout, and maybe I can accept it. Otherwise, it's just feeding the fatted pig for its own sake.
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