Passage of the Day: From IBDeditorials.com (Also, ‘Privatized Profits, Socialized Losses’)
After listing the roughly $2 trillion in bailouts ($800 billion) and money injections ($1.2 trillion) the Federal Reserve and Treasury have spent or committed to, mostly in the name of saving Wall Street, IBD puts forth outstanding punditry, parsed out pithily (bolds are mine):
Unfortunately, with the addition of taxpayer money, we’ve doubled down. Now the bet is the federal government is too big to fail. Yes, some of the government’s $2 trillion exposure to these bailouts may be recouped through asset sales, and the impaired equity might even trade again. But taxpayers are still on the hook.
We recognize that in times of financial exigency, as this clearly is, government often steps in to do what it can to stop the hemorrhaging. Politically, it may not have a choice. But we can’t forget that many, if not most, of the problems in the financial sector today are a result of government over-regulation, or misregulation, and political cronyism.
We’ve already documented how Fannie Mae and Freddie Mac were used as a jobs program for out-of-work Clinton administration officials and other Democrats, ranging from Franklin Raines to Jamie Gorelick to Jim Johnson.
And how tens of millions of dollars in political donations from those two government-sponsored enterprises distorted decision-making in Congress. This has been the problem all along.
The U.S. government regulates the private sector on behalf of taxpayers who expect competency, fairness and transparency.
But when the federal government messes up, those principles go out the window. And the lender of last resort isn’t the Fed or Treasury, as some would have it. It’s always the taxpayer.
Remember this when a Democrat-led Congress holds hearings — as House Speaker Nancy Pelosi now promises — and lambastes “the private sector” and “Bush economic policies” for these market meltdowns. Neither deserves the blame.
Also very relevant is an item that could be titled “Heads we win, tails you lose,” courtesy of my guardian angel:
Privatized profits, socialized losses
….. These financial institutions made silly mistakes, like giving mortgages to people with pathetic credit histories and offering ridiculous credit card limits to people who cannot afford them. Then the consequences are socialized to tax payers to foot the bill. Why are taxpayers held responsible for the irresponsibility of business leaders who leveraged debt with more debt?
The socialization of corporate losses does not create a climate of fiscal discipline desperately needed in global financial markets today. Additionally, why would a company like AIG want the federal government to have an 80 percent stake in its company? The government is ill-equipped to run itself, so why would one entrust billions of dollars of assets to the tentacles of government bureaucrats with a bridge loan?
No company lasts forever and it is not the government’s job to interfere with natural processes, especially when we are in the throws (sic) of corporate irresponsibility among private parties. Of course, the worse part of this current crisis is that it will result in more regulation because Americans have been conditioned to look to government to clean up everyone’s spilled milk.
One can only hope that a McCain-Palin administration would begin turning this conditioning around. There’s little doubt that Obama-Biden would double down on overregulation.
