Paul Krugman highlights yet another problem with bailing out Wall Street: As soon as the bad news ends, Wall Street goes right back to minting money–for shareholders and executives.
But that’s good, right? We taxpayers are shareholders of Wall Street firms. So we should be happy about that?
Well, no, we’re not really shareholders, because we just own preferred stock, which doesn’t participate much in the upside. And now, of course, we get to watch while Wall Street firms and folks who survived on our dime go right back to paying themselves fortunes again.
But get used to it…because there’s no way it would happen any other way.
The only thing that will stop Wall Street from paying itself astronomically relative to every other industry on the planet is a major reduction in the profitability of Wall Street firms. And when you lend Wall Street firms money for nothing, guarantee their debt, and demand that they start lending again for the good of the economy, of course they’re going to be wildly profitable. (When they aren’t writing down terrible gambling bets, that is).
We can’t have it both ways. We can’t save Wall Street and then micromanage how much Wall Street firms pay themselves, and we shouldn’t want to–because that really is screwing up the basis of the economy. So the answer is…
STOP BAILING OUT WALL STREET.
Got that, Tim?