Money Market Mutual Funds Treasury guarantee

Our friends over at Naked Capitalism have an interesting posting on the Treasury's just-issued "temporary" guarantee for money market mutual funds that pony up the appropriate fee.  See "U.S. to Implement "Temporary" Backstop to Money Market Funds (Updated)," Sept. 18, 2008.

I find myself with more and more questions, the more we see the Fed coming to the rescue of the financial system.  What should we require of those who benefited mightily from the generation of toxic waste?  Can we in any way exact a "clawback" of those benefits?  Where can we draw the line on the socialization of losses--why just financial institutions and not manufacturers?  Is this a replay of the early 20th century when Congress enacted some firewalls among financial enterprises?  What does this public rescue mean in a context where risk was allowed to proliferate without checks and balances?

 I'm not sure what the answers to these questions are, but I know that there needs to be an intensive discussion of the short-and long-term implications of the U.S. Federal Reserve, and via it the U.S. Treasury, becoming guarantor and holder of the toxic waste of the financial system and there needs to be an end. Ultimately, it seems clear that it is not a good idea to permit profit-makers to take huge risks--essentially speculating with core systems vital to an integrated economy--without having some authority (and willpower to use it) to step in and limit the impact of those risks on ordinary people.   The potential problems for the US and its people as the US debt burden mushrooms are significant.  One anonymous commenter on the Naked Capitalism site observed: "If there really is a secret desire among the leaders in the administration to bankrupt the government in order to "save" us all from terrible social programs, I believe they are putting in place the tools necessary to finally get it done."  (I assume that the commenter, like me, believes that our social programs are in fact terribly important, and that the course we are embarked on may be hazardous to our health.)

For additional recent articles on this and other financial crisis actions, see

Reuters, Treasury Aims to Bolster Money Market Confidence, Sept. 19

Market Watch, Confronting Economic Challenges Head On, Sept. 19

MSNBC, Explaining the Latest Measures to Restore Order, Sept. 19

Bangkok Post, US to Take Massive Measures to Avoid Collapse, Sept. 19

Bloomberg, Treasury, Fed Start Aid, Preceding Broad Crisis Plan, Sept. 19

Comments

[andy]

"Can we in any way exact a "clawback" of those benefits? "

Perhaps that would raise constitutional issues, if clawbacks were geared towards a small class of persons...

maybe NY can enact a one-time wealth tax...

definitely should try to figure out some get that profit back...not fair for them to take the millions of profit but then expect others to pay for their losses. if it's of any solace, at least since the really rich people pay the vast majority of taxes, they are the ones who are ultimately stuck paying for most of the bailout.