The recent economic earthquakes and subsequent government bailouts of a variety of big investment banks and (now, even) insurance companies, raises some fascinating ethical questions.
Is it right for the federal government to bail out these banks that took these risks and failed?
The difficulty here is that this issue presses exactly against our moral norms from both sides. On the one hand, the consequentialist in us screams that if we don't bail out these institutions, millions of others will suffer huge consequences (people who had their retirement savings with these banks, or many more people in general who will suffer from the massive negative impacts it would have on the economy, etc.). While on the other hand, we think it is wrong to step in and save these businesses when they took on the risk in the first place. We don't do that with individuals or small businesses. It seems we have made it an unfair win-win for these businesses. If they take risk and it makes profit -- good for them, and they reap the reward. But if they take risk and it fails -- then we'll step in and save them. But still... if we don't, many "innoncents" will go down with these institutions failures.
Of course, one could mention that this also speaks loudly to the larger issue of deregulation and lack of oversight that got us here in the first place.
Your thoughts? Should we bail out these huge financial instutions so they don't go bankrupt and, by consequence, bankrupt the rest of the economy?
Here's a few articles on both sides of the debate:
Here and Here and Here.
And also here and here.
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I understand that if something is not done, the country wil run into something similar to a depression. What I don't get is the US is already in many trillions of dollars in debt. Where is that 700 billion coming from? I mean it is obviously going to add to our national debt. So by bailing out this people, the US is only thinking short term. I do not feel that this is the best way to go because the already strugging economy would have to make up form that 700 b one way to another. This also raises the question on what is coming to our generation. We are the one would will have to deal with this debt, losing our social security and other benefits. Where does that leave us? Plus, this is all so sudden but what about the millions of home owners that the goverment did not seem to care about. Maybe if they had rescued these people in the first place, it would have prevented the first domino to fall. (not saying that I am economy expert). But with 700B and the median price home being 203K. the goverment could have bought some 3.5 million houses, more than the number of houses who currently are in trouble. Again this bailout seems too short term to me. It looks like later on, this bail out is going to be a big pain in our neck. Plus what does that say to the investors, who now will think that they can do whatever they want, because the goverment will jump in and saves them. I mean it is taking the conifdence in the invisible hand too far. I do agree that the goverment should not getting in the way of the economy, but should strickly keep an eye on it. Supervising is not interferring.
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