Robert Reich: Taxpayers Deserve a Share if Bear Stearns Makes a Profit

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• Bear Stearns "bailout" for taxpayers [4:38 -9:42]
• The prospect of a depression [10:26-14:38]

The idea is that if taxpayers are going to cover the downside, then they ought to have a share of any profits on the upside.

Comments

[walkingtheline]

The appropriate way to overcome the selection bias (taxpayers only enjoying the upside on stocks on the downside) is simply to tax capital returns more highly.

[craig tindale]

If you look at the filed Bear Stearns Fed Guarantee there is not limit to the losses the Fed will absorb its effectively unlimited.

[JRip]

Nice thought but will there be any profit? Will the Feds (we taxpayers) get the loaned amounts back; the principal?

If there is a choice between "properly, competently regulating the new financial instruments and markets" vs. "getting a cut of the profits for a bailout"? I know which one I would rank as top priority.

In the case of Credit Default Swaps should the banking/financial system really make a market for parties to create CDS for events in which they really have no participation or interest?

++++++++++++
On a different level...
When I buy a gadget I generally use it until it breaks.
Look at the preview photo from bloggingheads above. Two guys using telephonic devices that seem to have been acquired some or many years ago.

[oops]

Mark- thanks for posting that. aside from the policy stuff it was just really funny!

monologues "mostly in my head"
teaching at berkeley "an old economy job"

that's good stuff. gotta listen to the last half later.

[Cynthia]

I don't have a clue why we as taxpayers aren't getting any upside gains from the Bear bailout, especially since we did get some upside gains from the S&L bailout...

Now I can somewhat understand why shadow banks as a whole might warrant a taxpayer bailout. But because Bear is the only shadow bank to go belly up so far, it's looking more and more like the Fed was acting in undue haste to bail out Bear. Then again, it might be too early to tell whether Bear is just an anomaly in the shadow banking sector...

[Cynthia]

JRip -- I too can't decide whether the head/handsets are just fun props or seriously for real.;~)

[Dave]

The handset is hilareous. Has Logitech resurrected Bakelite for a retro line or have you actually firgued out how to videoconference back in time. If so, let me know ... I'd love give my late Grandfather a ring.

[Patricia Shannon]

Looks like the old AT&T phones that lasted forever. Nowadays, if a phone lasts as long as 3 years, that's exceptional!

[JRip]

Cynthia -
All you need do is press the start button. That image above is a live link to the bloggingheads interview.

[Patricia Shannon]

http://www.msnbc.msn.com/id/23835791/

Bear Stearns chair sells stake, nets $61 million
updated 1 hour, 32 minutes ago

NEW YORK - Bear Stearns Cos. Chairman James Cayne on Thursday dumped his entire stake in the embattled investment bank for $61 million as it appears closer to a takeover by JPMorgan Chase & Co.

Cayne sold 5.66 million shares for exactly $10.84 a share on March 25, according to a filing with the Securities and Exchange Commission. His stake was once valued at about $1 billion when the stock was trading at $171.50 per share.

[Cynthia]

JRip -- Just 'cause he's got a handset to his head doesn't necessarily mean that he's talking/listening through it. So quit being a smartalic!

[don]

What I question is the price of more than $10 a share. It seems outrageous to me that the shareholders should get anything if the company is actually bankrupt, especially Mr. Caynes, who I assume was paid huge bonuses when the company did well, but now faces little downside risk if it fails. Well, I guess his good work is done and he can move on, oblivious of the huge costs his ventures may impose on others. His actions imply to me that the stock price was more than a fair settlement.
There was a lot of nonsense bruited about, such as the building alone was worth more than the Morgan buyout amount. But the stockholders' equity is a net amount after debts are paid off, which can go negative regardless of the value of the building. Is the net stock value a reflection of the fact that the Fed is now letting "too big to fail" companies blackmail the taxpayer? The bailout should include an agreement whereby stockholders are obliged to repay any loss to the government (at least up to the value of the stock), plus interest and plus a fee that would cover the cost of such implicit insurance.

[Blissex]

«The idea is that if taxpayers are going to cover the downside, then they ought to have a share of any profits on the upside.»

The socialisation of profits to the benefit of losers is Communism, isn't it?

The socialisation of losses to the benefit of winners is Capitalism, isn't it?

The American Way is based on ensuring that high productivity (that is, high income) winners are rewarded, and low productivity (that is, poor) losers are punished for not contributing to the greatness of America.

After all, 60% of usians believe that they will end up in the top 5% income bracket, so they all support the idea of rewarding winners and punishing losers.