Posted on 11/19/2008 9:20:23 AM PST by UltraConservative
Our political leadership -- folks like President George W. Bush, Treasury Secretary Henry Paulson, Rep. Barney Frank, D-Mass., Sen. John McCain, R-Ariz., and President-elect Barack Obama -- told us that the government would save us. They said that the economic crisis was so dire, so grim, that we needed to allow the government to spend our money to bail out Wall Street. They stated that Paulson, with full authority and no oversight, would be able to right the ship.
We were ignorant enough to believe them.
Now they tell us that Paulson has exercised his authority recklessly. They say that they want their oversight back. They state that they need more cash for bailouts, and they need more leeway to create new regulatory schemes.
Will we be stupid enough to believe them again?
So far, the federal bailout, which was designed to jumpstart lending, has cost $300 billion and produced no effect. This is not a surprise. Lenders are rational actors. They tightened lending standards because they were hit hard by the subprime crisis -- a crisis caused by lax lending standards. But instead of seeing stricter lending standards and occasional bankruptcies as the natural outgrowth of bad decisions, the government panicked. The credit had to flow, our politicians told us. And the best way to make the credit flow was to hand over more cash to lenders.
This, of course, was sheer idiocy. Handing lenders money wasn't going to get them to loosen lending standards again. That money was earmarked for lenders' savings from the moment they received it -- lenders' first priority is to their stockholders, who want to see profit margin, not more bad loans.
But the government wants bad loans to continue. And so the government has decided that if lenders won't provide them, the government will. The first step is rescuing the Big Three in Detroit. We're told that General Motors Corp., Ford Motor Co. and Chrysler are the key to American industry -- a statement laughable in its exaggeration. We're told that if automakers go under, unemployment will skyrocket. We're told that these companies are too big to fail.
Here's something thats too big to fail: America's entrepreneurial spirit. But no one seems to care about that. Instead, we're supposed to worry about the risky lenders who bet wrong on the market; the risky borrowers who took mortgages they could never pay; and the risky investors who counted on both risky lenders and risky borrowers to keep the waterwheel of cash turning. In doing so, we ignore those who could actually heal the economy: solid lenders, solid borrowers and smart investors who will pick up the pieces of broken businesses and lead the way. But they don't matter. Instead, say the politicians, we should focus on GM. We should focus on Lehman Brothers. We should focus on the failures. And we should bail them out.
If we do, we will pay the price of a prolonged recession.
These bailouts have monetary costs that will cripple American business. Someone will have to pay for these bailouts. Either we will have to pay for them with higher taxes, or we will have to pay for them through inflation. The government is investing our money in bad stock. Would you buy GM stock right now? The government will, with your hard-earned dollar.
These bailouts also have psychological costs that breed dependency. Paulson is fond of saying that he wants to be wary of "moral hazard" -- the idea that we must not give incentives for bad behavior -- but then he pushes rewarding reckless companies with taxpayer handouts. Meanwhile, both Democrats and Republicans recommend rewarding risky borrowers by keeping them in the houses they can't pay for. How long will it be before folks stop paying their credit card bills and mortgages altogether, hoping that the government will step in to save them?
What we are watching is Carter-esque interference with the economy. President Bush's handling of this economic debacle will go down as the biggest black mark on his legacy. While supposedly touting the importance of capitalism, Bush has embraced the same Keynesian solutions that trashed the economy during the 1930s and 1970s. And both Republicans and Democrats go right along with him, psychotically citing the Great Depression while ignoring the basic fact that Presidents Herbert Hoover's and Franklin Delano Roosevelt's tinkering made a depression into the Great Depression.
The bailout is a disaster. And the politicians will continue fostering this disaster until the American people say, "Enough. We dont need your help. We will do this ourselves."
YES! Look at the power GWB gave to democrats. Economic Freedom republicans are demoralized, completely unrepresentative. His father never dug us a hole this deep, we had a chance 16 years ago.
I pray GWB doesnt hand democrats anymore power and moral authority before he leaves office.
Pray for President Bush and America - Day 2989
| November 19, 2008 | Faith
http://www.freerepublic.com/focus/f-news/2134681/posts
Speak for yourself, Ben. Anyone with a functioning brain cell and any concept of capitalism and what America is supposed to be was against that boondoggle from the moment they heard about it.
We're doing it again.
Many people have told me that "I just don't get it" and "If we don't do something, it could get really, really bad". I'm just not buying it. I'm a Conservative. I have faith in markets. Having some central authority step in and nationalize failing businesses (banking, autos, etc.) just is NOT going to seem like a smart idea to me.
The government needs to cut regulation and cut taxes and then just sit there.
I agree with the premise of the article which, as I interpret it, is that “bailouts” and “handouts” constitute nothing more than moving dollars around within an economy - and in many cases doing so with horrible inefficiency. It does nothing to create wealth which is the panacea to recession. Wealth is created by increased productivity - not movement of money. Movement of money is the byproduct of increased productivity. Pushing already existing money through nonproductive channels only exacerbates the problem.
I personally advocate a wage system based on productivity - even if it can only be estimated as is done in job performance reviews - with a base minimum stipend salary. Combined with the engine of capital, this makes economies grow faster than anything else.
Agreed. We’re still operating on the “too big to fail” premise, and this was one of the problems of 1900 to 1930. The Titanic wasn’t too big too sink and WWI wasn’t so big it made wars unthinkable. AIG isn’t too big to fail; GM isn’t too big to fail, and the US Government isn’t too big too collapse.
possible ping
“Great stuff.”
No question. Sadly, Paulson is going to look like a genius compared to the folks about to take charge next January. Historians hopefully will someday explain the pandemic of wishful thinking that has infected the public and policymakers during this strange political season. Obama has ginned up hopes far beyond the capacity of even a competent president to deliver, much less one so lacking in experience or bold decision-making.
And the very same capacity of Obama’s voters to ignore common sense and the lessons of history in favor of grandiose promises and empty platitudes underlies the willingness of others to believe that a “saviour” like Henry Paulson can spare us from the harsh economic medicine that Ronald Reagan and Paul Volcker dispensed (with great success!!!! How quickly we forget!) a quarter century ago.
Who's 'we' kimosabe?
L
Would have gotten more of a benefit just handing the bailout over to the pirates from Somalia than these guys and gals. I don’t get what the problem is with going bankrupt. Sure no one and no company should want to go bankrupt and it is a long drawn out paper intensive thing and you betcha some creditors will get screwed but it truly seems the only way that doesn’t break the country and there would be accountability and transcparency in a bankruptcy court and some of the crappy CEO’s will have to go. Maybe that’s why they are afraid of —accountability. I can’t believe Barney was saying crap about bankruptcy with His Excellency was hollering about changing the bankruptcy laws (something his VP helped changed)to protect more consumers and fools who didn’t read the mortgage agreement they signed or couldn’t read since they were illegal aliens. Bankruptcy is in our constitution unlike other countries and it is there to help the debtor and keep the business going so the world continues to go. If they can’t make it happen in bankruptcy court, then they don’t need to exist. Sure no one likes it but bankruptcy would solve the issue of the automakers easier, more efficiently and would free up those bailout funds for more useful purposes like Somalian pirates (just a joke—wasn’t supportive of the bailout myself). If they won’t go bankrupt, their creditors should make do the involuntary bankruptcy on them.
Pushing around NON-EXISTENT money exacerbates the problem to the max.
Yep - which is what happens when the Fed adjusts rates. It just either slows money printing or speeds it up beyond the amount justified by the overall worth of the economy. Pushing non-existent money just drives inflation.
OTOH - increased productivity increases wealth which in turn increases the REAL dollars in circulation. Another way of saying it is that you are robbing from Peter to pay Paul; and in the process no new wealth is created. So the economy overall is unchanged.
Hear hear!
Two primary ingredients to increased productivity:
1.) increased human motivation (working harder, better and longer)
2.) technological innovation in capital (increased automation)
You can’t legislate either
I get a surpising number of angry responses for comments like that. A small number of loyalists really insulate themselves with defensive rationales like,”the democrats forced him to do it”
Will we be stupid enough to believe them again?
We, The People did not fall for this bait & switch fraud. It was the idiot Congressmen. The People told them in no uncertain terms to kill the bailout. But Congress just couldn't resist meddling (and lining their pockets).
And yes, Congress will fall for it again...just like they did to cause the Great Depression.
Thanks Congress and President Bush...for putting us on the Highway to Hell!
well said.
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