Most people associate Obama with the (successful) bailouts, but TARP was actually passed when Bush was president, mostly with Democratic votes. The GOP was severely divided on the issue.
If something similar happens under Trump, the issue will be even more contentious, because the factions are split:
- PBPs: Save us! Save us! Then wait and see how ungrateful we are when it’s done.
- CLs: Using public funds to bail out private businesses is both immoral and bad economics. Liquidation is the only proper course, regardless of the immediate consequences. Hey, it worked for Hoover and Andrew Mellon.
- CDs: Avoiding the human costs of an economic disaster takes precedence over abstract concerns about moral hazard.
- Reactionaries: Nobody’s bailing me out–why should Wall Street get different treatment?
The potential for calamity in the face of a financial crisis, given the splits in the GOP and Trump’s economic illiteracy, is very grave. I will have more on that tomorrow.