That’s right — keep it simple, stupid.  The government’s plan to reboot the economy will work only if it is simple and delivers clear benefits to citizens.  The minute that this proposed bailout is perceived as a "get out of debt free" card for banks and their shareholders is the minute that it begins to fail.  Foreign investors and American voters are not going to trust it, and the money in their hands will stay out of the markets. 

The reason?  Restoring real confidence means making a moral argument about government’s purpose in saving the economy.  If it’s about backstopping massive corporations, citizens won’t buy into it.  Politicians pressured into approving it will deny responsibility for it as soon as it starts to leak at the seams.  And the foreign governments we need to keep investing will slowly back out with unforeseeable consequences for our long-term future. 

The reform needs to start not at the macro level with a $700 billion bailout, but with a calibrated plan to keep people (even people who made unwise investments) from losing their homes, cars, and savings.  A demonstration that government cares about these things first will make the larger pieces fall into place.  Bank shareholders and employees may be people too, but not as much as my neighbor who is out on the street.  So if an arcane approach is approved behind closed doors and is targeted at faceless corporations, rest assured: it won’t work. 

Ned Hodgman

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