Where Tony Blankley Is Wrong

Generally on Left, Right, and Center I am sympathetic to Tony Blankley. It isn't always his positions, but more his approach to argument that is normally based upon facts and answering the questions posed vs. Bob who goes off on nutty tangents and talking points. But catching up on last week's episode, he argued it was none of his business how the banks run themselves and the idea of the federal government having a permanent say over the bank business after the bailout is a bad idea. In short, he didn't think it mattered or was any of our business about the huge bonuses being paid out, especially because most of the banks paid back the taxpayers already.

I disagree.

Tony advocated the bank bailout because to not do so would have resulted in world wide financial crisis. When North Korea and Pakistan ask for this type of money from us, we call it what it is: blackmail. The banks blackmailed us for short term, no-interest, no strings attached, loans. They threatened us with worldwide economic catastrophe unless we bailed them out.

In most cases of blackmail, the issue isn't the money. When a tourist is kidnapped and threatened to be killed for $30,000, if you look at the calculation and say, is this person's life worth $30,000? The answer is always yes, especially if you can afford it. The blackmailers know this. North Korea argues - isn't it worth it for you guys to pay us millions of dollars so we don't build nukes? Or in the case of Pakistan, billions of dollars, so we don't let the Islamic Crazies take over. Yes, if you look at each individual case as a single issue, it is worth it to pay the people off.

The problem is that you create a moral hazard. You create a framework for blackmailers to continue the practice. That is why North Korea has built several nuclear bombs, despite paying them not to. It is why Pakistan continues to let the Islamic Crazies operate, despite paying them to fight. It is why tourists got kidnapped in Colombia for 25 years. And it is why the banks will continue to recklessly lend money and reward risky behavior. Because they know they have a bailout option. It's like telling a gambler to bet the rent on the NFL Playoffs. If he wins, he keeps the money and hails himself a genius for knowing what others didn't. If he loses, he puts his hat out and asks for his rent money from the Federal Government. And we give it to him. If I need to explain why this is unhealthy and unsustainable, well, I give up.