Monday, September 22, 2008

The Bailout 

The $700 billion Federal government intrusion into the banking industry is a gigantic opportunity for John McCain. Here is the perfect time when he can demonstrate that he is against big government. The candidate should turn the issue into an ideological war. Remember all the republican comments that we don't want the government running our healthcare system? Well now, in a clear socialistic model, Big Brother is taking over the U.S. economy.

I'm not going to pretend to understand everything about the current crises. But this paragraph from the Washington Post's Sebastian Mallaby yesterday got my attention:

In practice this means the government would make subjective choices about which bad loans to buy, and it would pay more than fair value. Billions in taxpayer money would be transferred to the shareholders and creditors of banks, and the banks from which the government bought most loans would be subsidized more than their rivals. If the government bought the most from the sickest institutions, it would be slowing the healthy process in which strong players buy up the weak, delaying an eventual recovery. The haggling over which banks got to unload the most would drag on for months. So the hope that this "systematic" plan can be a near-term substitute for ad hoc AIG-style bailouts is illusory.
For liberty loving people his comments recall the warnings of Frederick Hayek. When you divorce the discovery process from the market you end up with distortions that interfere with man's incentive to produce. Remember food lines in the Soviet Union? I am beginning to see closed store fronts straight out of the beginning of Atlas Shrugged and I am scared.

PermaLink | 6:20 AM | |

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