Why the Antibailout Right Is Wrong

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Let Them Fail

Maybe then they'll learn, for a while. It's a cycle, it will repeat itself, and nothing anyone does will change the nature of humans. Free markets work best, and wars against the laws of economics inevitably fail. Ask the Soviet Union how that one went.

It's like fighting a forest fire: if you suppress it now, it will come back next year, and the year after, and so on and so forth until lightning strikes one year, and you can't prevent it anymore. We have the $700 billion now, maybe, but next time? Will we have it then? Will we have the $1.5 trillion, the $2 trillion needed? And the time after that?

Better to let these companies fail, enter another Great Depression, and come out on the other side with an amazingly prosperous decade. Over time, when you allow the free markets to work, things get better, not worse. Fight them, and you get Russia, or Zimbabwe. I don't want to live in Russia, and I don't want to live in Zimbabwe.

of KS @ Sep 28, 2008 06:08:41 AM

Pethokoukis, you've taken on Michelle Malfeasance

You're gonna lose your Magic Neoconservative Decorder Ring for that one, Jimmy.

Malkin will probably post your home telephone number, physical address, and email address on her website.

Then all the little Malfeasance Drones will bombard you with death threats.

You're gonna pay for upsetting the Little Miss Muffet Malkin on the Neoconservative sect for this one, pal.

And, no, $2,000 for Natural Disasters, Alex, will not save you.

Mark of NY @ Sep 24, 2008 02:36:58 AM

Be true

I am an appraiser from the Chicago metro area and I completely agree with Ron Paul. The market must correct itself without any interference. When you have a Government who can't manage a budget, what do you think will happen if we approved 700m? It wouldn't be enough and they'd come calling for more, and more and more...the policies need to be changed...and more importantly, the role of Government really needs to be clarified. The reason we are in this mess is because of Government interference and now that banks are failing, they want us, the taxpayers, to bail them out? Completely ridiculous. This Government is filled with lobbyists which is why it will probably pass. Very sad, but true. Too bad more people couldn't have gotten behind Ron Paul and his message early in this electoral process or we might actually have a President who knows what the purpose of a Government is.

JRC of IL @ Sep 23, 2008 23:37:45 PM

If We Need A Correction, Shouldn't We Let It Happen?

I'm a fairly smart guy but I'm not an economist or historian, and some of what you said went over my head, however:

I'm personally aware that Real Estate prices in Southern California are overpriced... They've more than doubled in a few short years, and a regular family with two breadwinners could easily not be able to afford a modest house.

This can't last... If housing is overpriced, it needs to be corrected so these folks can buy Real Estate at *true rates* instead of the currently overpriced ones.

Doesn't this trillion dollar bail-out keep these prices artificially high for years to come, damaging all the people who WOULD be able to afford to buy a house if we didn't keep prices artificially high due to this bailout?

You dismissed the "Melonheads" out of hand as being absurd... but IS it absurd to let it fall? Short-term problems, prices find their true level, and we move on eventually. That's life, isn't it?

Cpt. A. Clown of CA @ Sep 23, 2008 22:27:04 PM

Bailout

Senator Shelby

You are correct when you say the crisis was created by "sloppy underwriting and reckless disregard for the risks they were creating, taking, or passing on to others."

Most importantly you are correct when you state "There are no credible assurances that this plan will work. We could very well spend $700 billion and not resolve the crisis."

Senator, the odds of failure are 100%. The Paulson plan will not create any jobs or help homeowners pay their bills. Instead it diverts $700 billion of taxpayer funds to failed banks that took excessive risks. The sheer size of the bailout will cause interest rates to rise, further adding to taxpayer woes.

Robbing taxpayers to pay failed banks cannot possibly work!

Printing money and giving it away cannot work either. If it did work, Zimbabwe would be the most prosperous nation in the world.

Senator Shelby, our prayers are with you that you have the courage to stand up for what you know you must do: Block This Bill.

I ask that you approach fellow Senators Jim Bunning, Chuck Grassley, and Jim DeMint in hope that one or more will have the courage to join you to in preventing what is still a preventable disaster.

http://globaleconomicanalysis.blogspot.com/

asdf of VA @ Sep 23, 2008 21:33:15 PM

The Bailout

Yes I agree Government did have a hand in this mess, but my view differs slightly. I believe that the part of the "Government" that had a hand in it was the same one that walks hand in hand with the Corruptorations. They gave the Corruptorations what they wanted and that was Deregulation, which was the ever present standard and battle cry. Republicans hate Government and want to decimate it, and what better way then to Bankrupt it into debt. What better way to cripple it so that it can never hinder the Corruptorations in their goal for world domination.

Fred Mannheim of OR @ Sep 23, 2008 20:43:28 PM

Trust Us ?

Nationalise these companies, own their stock. Send every American taxpayer a dividend check when they start to make money again.

John Poyhonen of NY @ Sep 23, 2008 20:10:34 PM

Save the system

Bailout is the most misused term in the lexicon. These CDOs are worth real money and moving them to the government balance sheet is a win / win. Too many people are totally misrepresenting this.

PAT DUGGAN of IL @ Sep 23, 2008 17:46:30 PM

Free market needed more than EVER

Apart from the wishing that people would live a "more moral life", exactly where was Melon wrong, Mr. Pethokoukis?

"unemployment increased from 1 percent to 11 percent back then. Anyone want to guess what the political fallout might be from a repeat of such a downturn?"

Exactly why should the American taxpayer care about the "political fallout" of tens of thousands of finance sector workers, and politicians, losing their jobs?

"There is such fear and there is such a lack of confidence out there, anything other than Uncle Sam coming to the rescue would cause a financial panic and create a cataclysmic tipping point."

Define "cataclysmic tipping point". The withdrawal of wealth from speculative ventures and then the reinvestment of the wealth in personal savings? Financial pundits and advisors lose their jobs, but exactly how would increased savings be bad for regular people?

"MellonHeads might want to spend more time making the case how big government caused a mess only big government can fix and how we can avoid a repeat."

No they shouldn't. They should spend more time making the case how big government caused a mess only the free market can fix and how we can avoid a repeat.

Ever wonder why and how Fannie and Freddie had a near-monopoly on the mortage game? What a shock that when they collapse it sends reverberations throughout the economy.

Free market needed more than EVER of @ Sep 23, 2008 13:45:33 PM

Another "expert" leading us down the wrong path.

Quit listening the these crooks and their cronies trying to save themselves. You want honesty, read this:

By Ron Paul

Special to CNN

9-23-2008

Editor's note: Ron Paul is a Republican congressman from Texas who ran for his party's nomination for president this year. He is a doctor who specializes in obstetrics/gynecology and says he has delivered more than 4,000 babies. He served in Congress in the late 1970s and early 1980s and was elected again to Congress in 1996. Rep. Paul serves on the House Financial Services Committee.

Rep. Ron Paul says the government's solution to the crisis is the same as the cause of it -- too much government.

Rep. Ron Paul says the government's solution to the crisis is the same as the cause of it -- too much government.

(CNN) -- Many Americans today are asking themselves how the economy got to be in such a bad spot.

For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.

Unfortunately, the government's preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention.

Ever since the 1930s, the federal government has involved itself deeply in housing policy and developed numerous programs to encourage homebuilding and homeownership.

Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.

Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.

These governmental measures, combined with the Federal Reserve's loose monetary policy, led to an unsustainable housing boom. The key measure by which the Fed caused this boom was through the manipulation of interest rates, and the open market operations that accompany this lowering.

When interest rates are lowered to below what the market rate would normally be, as the Federal Reserve has done numerous times throughout this decade, it becomes much cheaper to borrow money. Longer-term and more capital-intensive projects, projects that would be unprofitable at a high interest rate, suddenly become profitable.

Because the boom comes about from an increase in the supply of money and not from demand from consumers, the result is malinvestment, a misallocation of resources into sectors in which there is insufficient demand.

In this case, this manifested itself in overbuilding in real estate. When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their mone

James Henderson of IA @ Sep 23, 2008 13:23:29 PM

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U.S. News business reporter Matthew Bandyk examines the issues, people, and debates that shape the nexus of political and economic life in the nation's capital.

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