I suppose I’m more pro-bailout-with-severe-conditions than anti-, and part of that is a simple bias (I work at an investment bank after all, albeit a European one). The argument of letting the free market lick its own wounds is very tempting, but the problem is the process is a slower one and a more painful one than is politically acceptable.

For the major financials to work out their own problems would require a government (or rather many governments) to say, “We’ll take a hit of recession to come out healthier on the other side.” The problem is last time something like this happened, we hit the funk of the Great Depression… and I can’t imagine anyone wanting to sit by the sidelines here.

I would’ve preferred whatever bailout to be a severe loan or a significant discount on the price of these so-called “toxic” mortgages, along with criminal proceedings against many who led the merry dance of fiscal gluttony.

But, come on, this is Bush: “Fool me once, shame on — shame on you. Fool me — you can’t get fooled again.” I have more faith in the free market licking its wounds and recovering slowly than Bush rushing in with guns ablaze.

Sure, the health and education is much more useful and money-well-spent, but hey, there’s no immediate do-it-or-die urgency, and hence can be put off.

This? This is a disaster. A financial tidal wave. It’s do-or-die time. So they “don’t have a choice” and hence must spend the cash. This is typical “disaster recovery” where everyone fear the unknown, panic, says “do something do something” and then spend far too much resources.

Washington’s been painting a doomsday prediction over this “crisis” and been saying “we don’t know how bad it will be”. How much of this “crisis” is hype I don’t know, but if you factor in enough unknown, you’ll have a high enough cost-benefit ratio to justify 700bil.

Next disaster? Washington running out of money.