Monday, August 31, 2009

The fallacy of "taxpayer on the hook"...Fed made $14 billion on turmoil loans

This highlights the fallacy of "taxpayer on the hook." The profits on those assets could have been profits to the private sector if the Fed had merely sustained the banks with open-ended, non-collateralized lending. (It didn't have to assume ownership of those assets.) Now the profits go to the Fed or the public sector, but how does that benefit taxpayers? The answer doesn't! Do we all get a check to share in those profits? Does it go to pay down the deficit? If so, that is actually a loss to taxapayers because paying down the deficit reduces the wealth of the private sector by definition!

In actuality, taxpayers have have actually lost out from this!

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