the tindog coffeehouse

Is it OK to “let” your kids win? Last night my 5-year-old daughter Erin and I played a board game, and I won. Immediately she began crying because I didn’t let her win. I offered to play again, telling her she might win this time, but she wasn’t having any of it.

I’m reminded of that scenario this morning as I read about the federal government’s $700,000,000,000 (let those zeroes sink in for a second) plan to bailout the financial sector. Under the hastily proposed plan by Treasury Secretary Henry Paulson, the federal government would buy up a bunch of bad assets from banks in order to keep them from having to suffer the consequences of their actions.

But should it?

The Bush administration says that it’s necessary in order to end the financial crisis we’re in, but there’s no guarantee that the plan will work. But even beyond the question of the plan’s efficacy is the question of whether we should be letting these financial institutions off the hook in the first place.

We’re in this mess because of a host of systemic failures that have been largely ignored for years. And now, because it’s right before a presidential election, we’re supposed to rush in bailout these companies?

Certainly there are enormous consequences if we don’t, but what are the longer-term consequences if we do? By bailing out these companies, aren’t we letting them win? Aren’t we sending the message that if you screw up again, Uncle Sam will be right there, ready and willing to give you a free pass?

As BusinessWeek puts it:

The real problem with the plan, many economists argue, is that it attempts to be something that’s a contradiction in terms: a free-market bailout. By scooping up securities with no strings attached, it fails to give financial firms the right incentives to get healthy.

Erin eventually agree to play me again, and that time she won fair and square. Now that she was happy, I was able to talk to her and explain that in life she was going to win a lot and she was going to lose a lot and how if I let her win all the time, that wouldn’t be fair to either of us.

I just wish someone in Washington had the courage to have that same talk with the folks on Wall Street.