Joseph Stiglitz: Bailout Scam “Monstrous”

From http://www.infowars.com/?p=4895

Joseph Stiglitz: Bailout Scam “Monstrous”

Zogby International
September 26, 2008

Economy Nobel Prize Joseph Stiglitz last weekend said that the current bail out plan for the U.S. financial sector would be “monstrous” for US taxpayers.

“This plan is nothing else but a short term solution,” said Stiglitz in a Sunday interview with Germany’s Frankfurter Allgemeine Sonntagszeitung (FAS). “We’re turning risk investment funds into the hands of taxpayers,” pointing out that since no private investor wants to take responsibility for “risk investments, we’re simply wall papering them on to the taxpayer, and this is monstrous”.

According to Stiglitz the current crisis marks the end of a “disastrous economic model” and the end of the ideology “by which free and deregulated markets always function.” As a consequence of the current situation the US financial system as well as the US government “has lost all credibility.”

Stiglitz argues that to rescue the system and bring stability to markets, the US government is planning to buy from banks and financial institutions all “non liquid” assets that nobody wants and were the origin of one of the greatest and deepest crises ever faced by Wall Street and the US economy, the Great Depression of 1929.

For this reason, the Bush administration has requested from Congress US$700 billion for a special fund to purchase these assets and bring stability to financial markets. However, private estimates believe the cost of the final bill could be well over US$ one trillion.

But Stiglitz, who is currently a professor at the Columbia University in New York, the Bush proposal will not help solve the problem: “there’s every chance that other banks could also be affected.”




Stiglitz believes the root of the current situation is the sub prime housing problem and that government assistance must be directed at the mortgage problem. “This is only the beginning of the crisis,” he said, and predicted that the US is on the brink of a prolonged recession.

The solution is not bailing out banks by eliminating “toxic” debts, but rather helping home owners renegotiate conditions of their mortgages.

Still, US public opinion seems to be split regarding the rescue plan announced by Treasury Secretary Hank Paulson and which is currently under discussion in the US Congress.

A poll from Zogby International shows that 46% support the package and a similar percentage is against it, while 8% are undecided.

But opinions coincide regarding the depth and extent of the crisis: 70% see it as a long-term threat and only 24% believe it’s a short-term situation. An overwhelming majority, 84%, are convinced that it’s only a matter of time before other investment banks and some of the US main financial institutions collapse in the coming months. The Zogby opinion poll has a plus/minus 2.1 percentage points error.

In spite of the urgency requests from President Bush and Secretary Paulson, Congress is taking its time and the opposition Democrats insist in including aid for families affected by housing foreclosures and limits on the “golden parachutes” awarded to CEOs for mismanaging their firms.