http://www.economist.com/finance/displaystory.cfm?story_id=E...
> The technology bubble in the late 1990s at least left behind a modern capital stock, which continues to yield productivity gains; a property boom, in contrast, does nothing to boost long-term growth. Instead, it diverts resources away from more productive sectors and by fuelling consumer spending it exacerbates America's economic imbalances. Eventually, there will be a price to pay.
Also, I'm not sure that predictions of problems equate to knowing what to do to best wind down the current mess. You're right (elsewhere) that some things need to go under. However, I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it.
Of course I guess we'll really never know for certain in any case, as it's impossible to know what would have happened otherwise. We could have no bailout and massive failures just as we could have a bailout and still have massive failures. Or no massive failures in either case.
Raines may be in a dream business, but the net result of Fannie Mae’s actions in the credit markets is a nightmare of resource misallocation and massive systemic risk.
I've seen this movie before. If bailouts and stimulus packages worked Japan would have been the economic star of the 1990s and the Depression would have ended before FDR ran for the nomination.
Note that he's contributed $5 billion to the bailout of Goldman Sachs, in the form of convertible senior debt, at an interest rate of 10%.
Differences: preferred stock only pays a dividend when Goldman makes a profit. In a bankruptcy, preferred is ahead of common, but behind creditors. At any time, Goldman can pay Buffett a 10% premium to the issue price, and get the preferred back. If Buffett exercises his warrants, he will still own the preferred.