Bailouts and Business Confidence

In a previous post (here) I discussed the right-wing fixation with business confidence (no regulation, no taxes, etc.), credibility (austerity) and its relationship to the current debt crisis in the U.S. (the Subprime mortgage crisis or the Great Recession).

Right now, I'm reading Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselves by Andrew Ross Sorkin. Here's an interesting quote about the relationship between bailout (the TARP program) and business confidence. In the quote below, Hank Paulson is addressing the CEOs of the nine largest US banks in a private meeting at the US Treasury prior to modification of the TARP program (discussed in the video above).

"Through our new TARP authority, Treasury will purchase up to $250 billion of preferred stock of banks and thrifts prior to year-end," he [...Hank Paulson, Treasury Secretary at the time...] said, with the gravity due the unprecedented measure. "The system needs more money, and all of you [...the CEOs of the major US banks...] will be better off if there's more capital in the system. That's why we're planning to announce that all nine of you will participate in the program."

Paulson explained that the money would be invested on identical terms for each bank, with the strongest banks in the country taking the money to provide cover to the weaker banks that would follow suit. "This is about getting confidence back into the system. You're the key to that confidence."

The implication seems clear: what the right wing wants is austerity, deregulation, reduction in tax rates and bailouts to generate business confidence. Someone else can pay for government services necessary to run businesses (infrastructure, police protection, border security, national defense, education, basic R&D, etc.) and the negative externalities created by a free market (environmental damage, unemployment, poverty, financial crises, etc.). That someone else, of course, is consumers who are also being squeezed multiple ways by the debt crisis (loss of jobs, loss of income, loss of homes, etc.).

A good definition of political power is "...the capacity to restructure actual situations..." so they work out in your favor.