I enjoyed Stan's account of the CRFB annual dinner and the opportunity to assemble as the full CG&G team. I'll have one thing to add on the dinner in a later post. Since I was making the trip from the frozen tundra of New Hampshire, I made a day of it and attended the roundtable on the economy, financial markets, and the budget that preceded the dinner. For my part, I contributed the following to the discussion:
First, I asked the question, "Who are the Bear Stearns creditors and why is it so important [that it requires Central Bank intervention] that they be paid?" They invested and it turns out that they lost. They might have a case in court, but why do they have a special claim on the federal government? I don't believe they do, and nothing I heard convinced me otherwise.
Second, there was some discussion that picked up on Stan's frequent theme that the Bear Stearns bailout opens the door to rescue operations for Main Street as well. I pointed out that a good chunk of the January
economic stimulus deficit spending package was such a financial bailout. Considering that a large percentage of those who will receive their Wii-bate checks have credit card balances as large as what they'll get from the IRS, they would be wise to pay down their balances. If they do that, then the federal government has issued debt to replace the debt of other, less creditworthy borrowers. Voila, a bailout.
Third, I reiterated my disagreement with the CRFB's position this winter that favored a quick compromise on the deficit spending package over a constraint that it be paid for in the near future through higher taxes or lower spending elsewhere in the budget.
For my remarks at last year's roundtable, see this earlier post.