These are not Bailouts; They are Loans or Purchases

We need different terminology. To me a "bailout" is a gift. I'm sunk in credit card debt, I go to my folks, ask them to bail me out. And they do. At no cost to me. That's a bailout.

That's not what we've done with any of these companies. We've loaned them money on which they must pay interest or dividends. The Fed has acquired assets, in lieu of cash, which they can sell later on when the markets have recovered. We acquired equity via preferred or common stock.

Whether or not you agree with the original decisions, we are now committed and our only objective should be to ensure that these investments, unlike those in our 401Ks, actually generate a profit or, at worst, make us whole some years down the road.

Please remember Chrysler way back when. That loan, too, was widely criticized, but Chrysler paid the load back early and in full and at a profit to the taxpayers. So it has been done before. Not on this scale, of course, but it can succeed.

AIG, Bailouts: Temper Tantrums vs. Commonsense

OK, I have had enough of these temper tantrums, these "cut your nose to spite you face" Congressional and public rampages.

There are two choices re AIG and the other bailouts. And both are nothing but bets.

1. Let all these companies (AIG, Citi, BofA, the auto companies, etc.) go bankrupt and just hope that the world doesn't collapse. You want to risk a global depression? A stock market down to 0? You think these are exaggerations? If the financial world collapses, not even the full faith and credit of the U.S. is likely to save you. If you're right and I'm wrong, well, you can say "I told you so".

This is what can also be thought of as one side of the "sunk cost" decision. Yes, we've invested multi billions of dollars but that's no reason to send good billions after bad billions.

2. Monitor, regulate, exercise strong oversight and help all of these companies to recover. The consequences? The economy improves and all the taxpayers get paid back. It's possible that one or more of these companies will fail no matter what we do but, at a minimum, the money we've invested will have given us the time to wind them down in a more orderly fashion. Will this take time? Yes. The economy isn't going to recover tomorrow and none of these companies can fully recover until the economy does. But only children should expect things to happen tomorrow. So what if it takes 4 or 5 or 6 years to full unwind everything? In the history of the country, that's about the length of the Revolutionary War, the Civil War or WWII. And it's a lot shorter period than the Great Depression.

This is partly much the other side of the "sunk cost" assessment: I've already put so much money into this hole, I might as well keep going and hope for the best.

Me, I'm the cautious and optimistic sort. I prefer choice #2.