How important are these two organizations? Would we rather have them or not have them? That seems to be a prime question being put before the Congress, and by extension, their public consituents.
The two investment banks are badly in need of capital. If the US government doesn't put in action a plan that re-capitalizes them, it looks like they will cease to exist. As Paul Krugman is sharply pointing out, the question does not seem to be whether the government should take over the banks' assets. The question is at what price. And it is exactly the price paid that will determine if Goldman and Morgan receive the level of capital they need. Mr. Paulson and Mr. Bernanke are arguing that the banks need/should get better than market prices. The question the government and the public -- with a major financial decision before them -- are asking themselves is, why?
The reason being given is that the government and the public benefit from the existence of Goldman and Morgan. In other words, we have an incentive to pay such high prices for bad loans because we suffer if the banks' balance sheets aren't freed up. I overheard Jim Cramer on his show, I think it was yesterday, arguing for the $700 billion and saying that without it, we are staring at 30 percent unemployment. It is clear that the Goldman/Morgan case is that by saving them we save ourselves.
My answer to their case is I think I could agree, but if it is true, show the data suggesting it to be true. All I hear right now are assertions.