I’ve been mostly against the bailout, but Jerry Bowyer makes an interesting point. If government passes around "regulatory kooties," then government (at our expense, of course) may have to clean up the mess on purely utilitarian grounds. He makes a singularly smashing point against the lying left, though:
Freedom didn’t lead us to this crisis — central planning did. We weren’t under-regulated; we were over-regulated. There has not been a single piece of deregulatory legislation passed in the last eight years. But there was a major piece of re-regulatory legislation passed under Bush — Sarbanes Oxley. By upping the penalties on financial executives largely from civil to criminal sanctions it put the whole multi-thousand page regulation manual on steroids. No more fines; next time handcuffs. No wonder, nobody wanted to hold politically tainted paper. Owning a mortgage backed security in this environment is like owning a pointy hat and a black cat in colonial Massachusetts.
No deregulation? The Democrats, nay, the whole left are flat out lying about this being the result of laissez faire. If anything, government’s regulatory kooties get the most blame in all this. But where did the problem come from?
These securities which the government invented (through Fannie Mae), and foisted upon the banking community (through the Community Reinvestment Act), now has regulatory kooties. Own and you’ll get sued. Sell it and you’ll get sued. Keep it and the regulators will force you to write it down to panic level prices, and then you’ll get sued. Try to foreclose and state and local government will refuse to enforce the contract. Try to get private equity investment to keep your balance sheet alive and you find the door barred by 80-year-out-of-date regulations like the Bank Holding Company Act.
Government did this to us. This plan isn’t a bail-out; it’s more like reparations.
While Bowyer is dead-on when it comes to apportioning blame, I think this will be a sad case of bureaucrats and their handmaidens (the media) creating a problem and blaming it on the market or on greed. It’s sickening. While voters are hung on the narrative of bailing out greedy fatcats, the true culprits in all this will end up picking our pockets again. I’m still of the mind that no bailout is the best solution. Let the market punish everyone involved, including those in office who made this mess.
Here’s a good addendum on the matter from Prof. Boudreaux:
The American Heritage Dictionary defines "laissez faire" as "An
economic doctrine that opposes governmental regulation of or
interference in commerce beyond the minimum necessary for a
free-enterprise system to operate according to its own economic laws."
No one who examines the American economy in general, or credit markets
in particular, can truthfully conclude that laissez faire has reigned
in recent years. … To blame this crisis on laissez faire is akin to blaming the death of a heroin junkie on exercise, eating right, and sobriety.
When has intellectual honesty ever appeared when you needed it?