I did a short interview with Rick Newman of US News on the state of Bailouts. Here is a quick excerpt:
“The ideal bailout is not a bailout of reckless financiers. It’s like the government equivalent of a hospice for dying companies, involving no taxpayer money and no moral hazard. And the people who behaved recklessly, they get their comeuppance.
The most egregious bailout, that’s a tossup between Citigroup and AIG. I think AIG was worse just because it involved so much money. And there’s no way we’re going to see all of that back. It could end up being the greatest theft in history.
Citi is a perennial debacle. They were clearly insolvent. They were too big to fail but also too big to succeed. They had lobbied for the repeal of the Glass-Steagall Act for 10 years before it actually happened. They started in the late ’80s, when they realized they were limited in terms of growth and the only way to really grow would be to buy other companies on other side of the investment business. To do that, they needed the repeal of Glass-Steagall. The bailout was the classic example of saving the bank instead of saving the banking system.”
The full interview is here.
How the Bailouts Could Have Gone Better
US News & World Report, September 01, 2009 04:19 PM ET