Posted by PrestoPundit on 09/25/2008

to the bailout plan:  add a clause tying the pension of the President and the members of Congress to the financial success of the plan.  If Bush is right, and all of these junk mortgage securities turn out to be undervalued, then the taxpayers come out big financial winners.  In that case, Bush and the Congress can get their pensions. 

But if these securities are actually over valued, and it ends up costing taxpayers money, Bush and the Congress forfeit their pensions to help defray the massive costs of their terrible financial judgment.

As Milton Friedman often pointed out, people tend to make better decisions when their own money is on the line, and they tend not to make such good decisions when they are deciding with other people’s money.

UPDATE:  Chrisj comments:  “One principle that’s central to the market bailout is this notion that risk and reward go together.  Why should this not also apply to the folks in government?  Do you think we’d get a little more risk aversion if the president, SecTreas, Fed Chief, and everybody in congress’s future pay and pension was tied to the outcome?”


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