Professors Scrutinize $700 Billion Bailout Plan

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As legislators continued debating the $700 billion bailout in Washington, D.C., UC Berkeley professors presented their own solutions for the financial crisis during a panel discussion yesterday.

As media, students and faculty packed into the auditorium at Boalt Hall School of Law, campus experts in economics, public policy, business and law discussed the root of the financial crisis during the panel, titled "Global Financial Market Turmoil."

"We need to address the housing problem first in order to solve this problem," said Barry Eichengreen, a professor of economics and political science. "But it is also a student loan program, auto loan problem, university credit problem."

As professors addressed the overall state of Wall Street, they and attendees were most concerned with the contentious bailout plan.

The plan, initiated by Secretary of Treasury Henry Paulson, would give the United States $700 billion to buy distressed bonds from banks. The plan was rejected by the House of Representatives on Monday yet approved by the Senate on Wednesday. The bill will return to the House today.

Most panelists agreed that the bailout plan was not an immediate solution. Several speakers added that naming the plan a "bailout" is only a tarp to cover up the problem.

"Instead, I recommend calling it a seizure program. It is not the business of the government of the United States to protect rich investors," said J. Bradford DeLong, a professor in the economics department.

Several professors branched off the bailout and offered their own solutions to the economic downturn.

Aaron Edlin, a professor of economics and law, compared further economic turmoil to a firestorm. To offset the storm, Edlin recommended guaranteeing continuous access to funds and creating unlimited deposit insurance.

"I want to build a firebreak and prevent bankruptcy," Edlin said.

The Wall Street shake-up will also spread to other parts of the world, many professors noted.

"The banking crisis has surfaced with a vengeance in Europe," Eichengreen said.

While most eyes were on the panel, a political action committee, called Lyndon LaRouche, also flyered to promote an alternative solution.

"(The bailout plan) is a nation-killing plan which will lead the world into economic collapse and a new Dark Age," the flyer stated.


Contact Erika Oblea at [email protected]

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