this, that, and t'other

Do I know how to solve the current economic problems facing us?
No.

That ignorance will not stop me from opining.

First, a book recommendation:

Paper Money, by Adam Smith
[no - not THAT Adam Smith!]

This volume is almost 30 years old, but speaks to today. A quotation:

"We are going to sell America for a product that burns up in the atmosphere."

... speaking, of course, of oil.

Bailout vs Chapter 11 Bankruptcy?
There are a few easy decision rules in the world. My favorite is:

Can't hurt.
Might help.
Costs nothing.
DO IT!

The "bailout vs bankruptcy" dilemma does not fit this paradigm.
BUT: there is another fairly easy decision rule available when faced with an "either/or" decision: do both!
Structure a bailout as if it were a Chapter 11 Bankruptcy.
Honor creditors, but insist on

1. Restructuring
2. New management

GM (as a convenient example) has a good deal of valuable physical infrastructure and intellectual property - simply liquidating these assets may not be the best option. How 'bout we structure a bailout to look like a Chapter 11 bankruptcy?
Equity holders get the shaft (sorry).
GM emerges leaner & meaner - and, with any luck, competitive.

Had the same tactic been adopted with the financials, we'd not be learning that AIG continues to hold executive retreats. We'd not be learning that institutions receiving OUR $$$ continue to pay dividends to shareholders.

New management? As has been pointed out by others, it seems just a little absurd that Secretary of the Treasury Paulson - formerly of Goldman, Sachs - is in charge of the rescue. The folks that got us into this mess with their deification of the "free market" are the same folks now tasked with solving the problem!

This last observation is at the heart of a previous post: let's wait for Team Obama to take the field.
Can we afford to wait?
Can we afford NOT to wait?

This, that, and t'other: Why do firms in dire straits always pay retention bonuses to high-ranking executives? Enron did this. The big finance folks are doing it now.
The argument seems to be something like, "These folks are the best and the brightest. They know the business. We need their expertise."
... no one ever seems to ask the obvious question: "Aren't these best-and-brightest the same folks that got you INTO this mess?"

Many cogent arguments have been advanced against Thomas Kuhn's thesis that new science advances only with new generations of scientists. His paradigm fits some Scientific Revolutions particularly well, but does not fit all cases. (The Structure of Scientific Revolutions, Thomas Kuhn, Third Edition, 1996.)

I'm betting that resolving the current economic crisis does require the infusion of new blood - the next generation of economic wizards. The last generation, led by Milton Friedman, didn't do such a great job. Let's give the neo-Keynesians a shot.

If nothing else, the Reaganite supply-siders & free-marketers have been entirely discredited.
Even the deified Greenspan has admitted that his faith in market "self-regulation" has been undermined.

Why has oil dropped more than 50% in less than half a year?
Drop in demand.
The magicians of Wall Street with all their financial legerdemain couldn't keep the price of oil up forever based on supply.
OPEC is struggling to control oil prices based on supply.
It ain't working.

Free advice to Dems (worth every penny!): whenever one of your opponents mentions "free market" or "self-regulation", break into an uncontrollable, hysterical laugh... make sure that the laughter is directed pointedly at your respected opponent for uttering such nonsense syllables.

Have a nice day.