I'm from the centre-left, but I'm gobsmacked at the latest events in the United Staes. It was OK to nationalise Fannie Mae and Freddie Mac (initial cost $100bn) and rescue AIG for $85bn, and rescue Bear Stearns for $30bn. Despite the $5.4 trillion of liabilities Fannie and Freddie have, and the $185bn liabilities in AIG, most of those will come good, only a small part are bad. In the long-run the taxpayer will make a profit (and this is the case for Northern Rock too), and the present cost to rescue them is reasonable in the circumstances.
But this $700bn rescue fund being proposed by the Bush administration to buy toxic assets is something else. These "toxic assets" are worthless, that's why there is a problem in the first place. Unlike Fannie and Freddie where the nationalisation meant that the taxpayer gets the good with the bad, this new plan means that the taxpayer is essentially giving away a load of money for junk with no value and the only ones to benefit are the companies receiving the gift. Talk about getting rewarded for screwing up the system.
The markets are nervous too - stocks, bonds and the dollar all collapsed today and NYMEX oil for October delivery jumped $25 in a day, as people sought a safe haven. Because the end result of this can only be a sharp downgrading of the superpower's own credit rating, which implies that being loaded with junk like this might cause Uncle Sam to default in the future.
I can't believe they are even considering doing something with those sorts of implications. Frankly they'd be better off nationalising the whole banking system, even if it made them more Commie than the People's Republic of China (which has been privatising stuff in recent years). Nationalisation at least means the state gets the good bits with the bad, plus control over the banks - it means the state has a chance to break even or make a profit (with the potential for future privatisations) and thus the state/taxpayer gets to survive all this relatively intact. But gifting money to robbers in return for worthless paper, just puts too much strain on the state.
Even worse was Hank Paulson's exhortation for the rest of the world to follow his example. Eeeu! If our government wants to make emergency nationalisations, fine. Gifting taxpayers money to the city, no.