A senior Treasury official involved in the bailout effort said the administration was carefully trying not to do anything that could harm the banks and was giving financial incentives to modify mortgages. The official said the restrictions were part of a larger effort to clean up bank balance sheets and assist the economy. “We’re having to take some very unpleasant actions when the alternatives are so much worse,” said the official, who spoke on condition of not being identified.
Excuse me, but the government should impose any conditions it deems prudent. The idea of free government money is the problem here. This is, after, a bailout we are expounding. Some people seem to think that the purpose of the bailouts is to strengthen the position of these banks:
[A] growing chorus of industry experts are warning that asking weak banks to carry out the government’s economic and social policies could increase the drain on the public purse. These experts say that the financial assistance, while helpful in the short run, could force weak banks to engage in lending practices that will lose even more money, and that the government inevitably will become more heavily involved in dictating how banks do business.
“I honestly believe the people in power pushing this policy see it as a win-win — as something that is good for the banking industry and good for homeowners and others,” said Douglas J. Elliott, a former investment banker who is now an economics fellow at the Brookings Institution. “But there is a slippery slope and there are potentially significant negative consequences.” Mr. Elliott says that by modifying loans, banks that are already fragile could wind up losing more money. “What gets us in real trouble,” he said, “is when we try to fudge things and pretend that something is in the direct interest of both the government and the financial institutions when it in fact costs the banks money or increases their risk levels.”
(Emphasis supplied.) Precisely right Mr. Elliott. Do not confuse the purpose of the bailouts. They are to serve the COMMON GOOD, not the financial institutions. The financial insitutions should act in their own interests and if those interests do not coincide with those of the Common Good, then they should forego bailouts, if they can. What's so hard to understand about that?
Speaking for me only
