Warren Buffet said that he could invest 1% of $700Billion provided Government buys the mortgage backed securities at market rate. However, the media conveniently ignores the ‘market rate’ part of his statements. Media projects his statements has an endorsement to the arguement that Taxpayers will make money in the long run.
Nobody knows, what government will pay for these unwanted mortgage backed securities. Nobody in the world is interested in them. If Government pays the market rate, economy will collapse and jobs will be lost. If Government buys them at above market rate, banks will win but taxpayers will loose and we don’t know if the economy will recover.
Buffet is interested only if he gets to buy them at the market rate.
Anyways we have very few choices to make.
1) No Bailout: Economy will collapse right away.
2) Bailout or buyout at the market rate: Economy will collapse within months.
3) Bailout or buyout at above market rate: Economic collapse will be delayed, tax payers will not make money and there is no guarantee that these banks will be able to keep the jos.
With choice 1, our future generations will thank us and we will take the pain now.
With choice 2, 3 our future generations will curse us and we will lead a luxurious life that may not last long.
No prosperity without pains and we should go with choice 1.
Filed under: India blogs , $700 Billion bailout plan, $700 Billion package, $700 Billion package passed by senate, bailout or buyout
