First, briefly, the U.S. auto industry bailout. If the objection was that the U.S. automakers have been shortsighted, then here, HERE! But we might have structured the bailout any way we wanted: we could have required that Ralph Nader be made C.E.O. of General Motors and they figure out how to make cars that run on turnips. Whatever we fault them for, we could have changed it. For the sake of three million jobs, our ideas would have been worth trying.

From what I understand, the real problem with the auto bailout was that Republican senators from southern states saw a union-busting opportunity, and more importantly a Republican-making opportunity. The southern states heavily subsidize their non-unionized foreign car making plants – such as Honda in Alabama, BMW in South Carolina, Nissan in Tennessee, Toyota in Kentucky – and thus have a strong interest in the failure of the unionized G.M., Ford, and Chrysler plants in the North. Their interest is both political and financial. Politically, they want to show that high-tax, high-service, union-friendly, blue states cannot compete with low-tax, low-service, union-busting, red states. Financially, hurting the U.S. manufacturers and thus helping the foreign ones with plants in their states is their obvious interest.

But where this really becomes crazy is at the level of principle. The southern state governments are giving bigger subsidies to their Toyota, etc. plants than the U.S. proposes to give to G.M., etc. Add that Toyota, etc., are already receiving massive help from their home governments, in Japan, Germany and South Korea – more than anyone proposes to give to G.M., etc. So the southern states are using as much big government, foreign and domestic, as they can muster, in an effort to prove that big government does not work. This is a new dimension in dishonesty. If they succeed, what they will really prove is that big government can be defeated by bigger government. Yet they pretend that they are working for the victory of unadulterated free markets! If anyone really thought that these southern Republican senators believed in the conservative principles they espouse, then here is their wake-up call!

Now for the BIG bailout. This makes even less sense to me than what has happened with the auto bailout. The financial crisis began with a high-risk mortgage crisis. Lots of unregulated financing, swapping and insuring of mortgages that never should have been granted, much less insured. And so on. However, the average home price, now, in the U.S. is $207, 000. Since the average down-payment on a home has long been more than $7,000, we could have simply used the $700 billion to buy out more than 3.5 million mortgages, and then make whatever repayment arrangements we wanted with the homeowners. Although there would be difficulties, we would have a better chance of getting our money back from them than from the Wall Street giants, I’ll wager.

The exact figures I use above assume that the average at-risk home-owner paid only $7,000 down and never made another payment. In fact, the majority paid more than $7,000 down and have made some payments. My guess is that we could buy all (if not more) of the at-risk portions of all 7 million at-risk mortgages in the U.S., for less than $700 billion dollars. That would have brought the crisis entirely within our control. If after that there remained Wall Street problems, then we would be certain of fraud and be able to seek indictments. If after that, there remained legitimate mortgage market financial problems, then we would have as much leverage as is possible over them, through our absolute control of at-risk mortgage markets. Any remaining market problems we could track down to other causes, and deal with them.

Instead, we chose a big bailout that is as likely to hurt as to help us. Throwing money at big banks with no serious strings attached may hurt, or help, depending on their interest. My guess is that it will hurt. However that may be, it ruins the possibility that we might learn from this. If things get worse, or things get better, we will have no idea whether our $700 billion donation to big finance had anything to do with it. If things get worse, we will wonder whether they would have been much worse without the big bailout. If things get better, we will wonder whether they would have been much better without the big bailout. And so on.

Although my knowledge of these things is not great, it seems to me like we are bailing out those whom we shouldn’t and not bailing out those whom we should. As I see it, there is a common cause: we fear government involvement in finance. But how brutally must giant private interest rape us before we consider public interest? Another Great Depression? Worse? I am not suggesting that we must choose between Reaganism and Marxism. There are many other possibilities. We might, for instance, manage both the mortgage and auto crises from the bottom up, without coming close to Marxism. Before Reagan both parties used to sometimes favor bottom-up solutions. Eisenhower and Nixon often did, and they were hardly Marxists. Whether we look backwards, like conservatives, or forwards, like progressives, let’s ignore Reagan and think about bottom-up solutions, at least until we get past this mess.