Financial Crisis Solved for $40 million? …Not quite…

I read an article on line last week which basically argued the following:

America has 40 million ppl over 50, give each $1mil to retire and require they buy 1 new US car and buy a house or pay off their home…40 mil job openings, 40 mil mortgages paid, 40 mil new cars sold, 40 mil retirements saved…financial crisis solved for $40 million, a tiny fraction of the estimated 11 trillion dollars already committed to this ‘recovery.’

why not?

…First of all, as ‘Cookville’ points out in his comment below, 40 million people times $1 million dollars is NOT $40 million, but rather $40  trillion, additionally, Obama and the Treasury people are saying that the money is being given to the banks instead of directly to citizens because doing so allows for 8$ in loans for every $1 dollar put in, allowing it to effectivley create 8 times as much “stimulus” via bank loans as it would in the hands of the average consumer.  I’m still not clear on how or why this would be true, but it is what they are saying.  Would love any further explanation or ideas about what is better than putting money in the hands of the citizens and exactly why?

Read world-renowned Harvard economist, Greg Mankiw’s take on the AIG bailout, here.

World-renowned Harvard Economist, Greg Mankiw, had the following to say about US Taxpayers bailing out international banks and insurance companies on Monday: (see his post in its original format by clicking here.)

More Capital for the Financial System

Doug Elmendorf and Paul Krugman seem to agree that the government should be putting capital into banks and other financial institutions, in exchange for a share of bank equity, rather than using taxpayer dollars to buy bank assets that no one else wants at prices no one else will pay.

See also Sebastian Mallaby, who conveys this proposal:

Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. Banks don’t do that on their own because it would signal weakness; if everyone knows the dividend has been canceled because of a government rule, the signaling issue would be removed. Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they don’t want to signal weakness and they don’t want to dilute existing shareholders. A government order could cut through these obstacles.”