Just Say “No” To Bailouts.

18 Sep, 2008 by John Hawkins

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As a general rule, I’m against the government bailing out anything, ever, and going by the latest Rasmussen poll, most Americans seem to agree with me,

“Only seven percent (7%) of voters think the federal government should use taxpayer funds to keep a large financial institution solvent. Sixty-five percent (65%) say let the company file for bankruptcy.

These numbers are generally the same across Republicans, Democrats and unaffiliated voters.”

It tells you a lot about the quality of the politicians we have when both the Republican and Democratic candidates for President, along with the current President of the United States, all seem to favor a policy only 7% of the voters agree with.

I’d also note that Congress is every bit as much esponsible for these huge failures as the companies themselves. They set up a regulatory system that encouraged the companies to try to maximize their profits by making sketchy loans to people who weren’t good credit risks and everybody was happy — for a while. The companies were making money, they were contributing cash to the politicians left and right, the pols got to brag about how they were helping more people afford homes, and there were people who probably weren’t making enough money to pay for a house at all buying expensive homes and watching the value of their property climb.

That’s how it always is with sin and socialism, folks. It always seems like fun — for a season. Then eventually, the bill comes due and there’s hell to pay.

Those corporations? The government set up the system that encouraged them to make bad loans and they’re only worsening things by buying them out. They’ve set up a situation where the companies were rewarded for making foolish loans and now the same companies are being rewarded for not being able to pay their bills with a bailout.

The Democrats, being socialists at heart — are trying to blame “deregulation” for this. That’s pure, unadulterated horsecrap. In fact, Thomas Sowell, who has probably forgotten more about economics than most of the members of Congress have ever known, pointed out the Congressional link back in August of last year,

Politicians have also been a key factor behind pushing lenders to lend to borrowers with lower prospects of being able to repay their loans.

The Community Reinvestment Act lets politicians pressure lenders to lend to people they might not lend to otherwise — and the same politicians are quick to cry “exploitation” when the interest charged to high-risk borrowers reflects that risk.

The huge losses of sub-prime lenders, some of whom have gone bankrupt, demonstrate again the consequences of letting politicians try to micromanage the economy.

Yet with all the fingerpointing in the media and in government, seldom is a finger pointed at the politicians at local, state, and national levels who have played a key role in setting up the conditions that led to financial disasters for individual home buyers and for those who lent to them.

While financial markets are painfully adjusting and both lenders and borrowers are becoming less likely to take on so much risky “creative” financing in the future, politicians show no sign of changing.

Why should they, when they have largely escaped blame for the disasters that their policies fostered?

In other words, “There is no such thing as a free lunch;” you can’t set up a regulatory system where people who are barely scraping by can get loans on $500,000 homes and then have the government step in and “fix” everything with taxpayer money if enough of them default — and not expect it to end in a trainwreck.

It’s also worth noting something else: there are always economic cycles. At no time in history, under no economic system, under no particular political leadership, is the market going to always move up. There are going to be down times and contractions and, yes, there are always going to be different winners and losers. What people need to consider, especially at times like this when you have gangs of Henny-Penny’s screaming that the “sky is falling,” is that, yes, we do need some government regulation, but the freer the market is, the better off we’ll be over the long haul. On the other hand, the more we regulate and allow Washington to meddle in the markets, the more problems we’re going to have.

Whether we’re talking about the Depression, the Savings and Loan fiasco, or the current bailouts, there’s not a single one of those problems that was not ultimately caused by federal government meddling. That is almost always the case, folks. Show me a major league economic (or for that matter, social) problem, and if you look back far enough, you’ll find some gang of politicians who accidentally engineered it somehow. That’s not quite as certain as death and taxes, but it’s close.

So, the more we let the know-nothing politicians in Washington tinker with the economy, the more economic problems we’re going to ultimately have. Whether it’s bailing out these corporations or bailing out people facing foreclosure, we’d be much better off if they just let the market correct itself instead of generating a whole new set of issues we’ll have to deal with 10 or 20 years down the road.