George Santayana once said that those who forget the past are condemned to repeat it. Karl Marx said that history repeats itself, first as tragedy, second as farce. If Marx was right then Santayana must be also. What is happening now does have all the elements of farce, but I at least don’t remember this happening before.
To review some recent events: a little under two months ago, Treasury Secretary Paulson came to Congress asking for $700 billion dollars with which to buy mortgage backed securities from distressed firms. At the time we were told that it was essential that this plan was enacted and enacted quickly. There was no time for real debate or examination of the plan or its alternatives. We had to act now! Those who opposed the plan were heaped with scorn. Indeed, some even suggested that the Paulson plan made sense simply as a money making venture, and that ideally the government could do away with taxes altogether in favor of raising revenues through such schemes.
In any event, two weeks later the plan was passed by Congress and signed into law by the President, and then… nothing. Nothing happened. Don’t worry, said the Treasury, we never intended to actually start buying distressed assets so soon. Still working out the details and all that. But soon. Soon.Another two weeks passed with nothing much happening. Former Goldman Sachs C.E.O. Paulson announced that former Goldman Sachs Vice President Neel Kashkari (sound it out) would be in charge of the program. Then, on October 14, Treasury announced that it was giving a good chunk of the bailout money to America’s nine biggest banks, in a transaction described as being “not voluntary.”
Since then, all sorts of folks have lined up to get their share of the bailout money. U.S. auto makers have made headlines over their plea to get some of the cash, but bailouts have also been proposed for everyone from boating to the Ethanol industry. And earlier this week Treasury announced that it was using precisely none of the bailout money granted by Congress for the Troubled Assets Relief Program to, you know, actually buy troubled assets.
Who knows what the next two months will bring?