Last week the Boulder Daily Camera published my comments on the bailout:
President Bush wants the Government to buy “difficult-to-sell assets…from banks and other financial institutions” because it “will address underlying problems in our financial system.”
Let’s translate. Professional lenders made poor choices and are stuck with stuff no one wants. When government forces taxpayers to buy it from them, it punishes both taxpayers, who have less money to buy what they want. It also punishes producers of goods people actually want by taking away their customers. Lenders benefit by escaping the true consequences of their poor choices, and are more likely to err again.
We should not punish those who create wealth to reward those who squander it. That would be “an underlying problem in our financial system.”
Government should not intervene in our lives unless it’s in response to people violating our rights through force or fraud. But politically-motivated intervention in mortgage markets has contributed to this mess.
A bailout allows government to do even more harm. As former Freddie Mac senior economist Arnold Kling explains at EconLog, the “bailout is going to lead to the same two-way influence peddling. … An orgy of lobbying is bound to ensue. … it creates a tight interlocking between Big Finance and Big Government [and the] the consequent destruction of liberty and economic dynamism.”
I’m happy to note that Arnold Kling is a Swarthmore graduate, as is Jeffrey Miron or Harvard, who has also written a good piece on the bailout at CNN.com. Also check out David Harsanyi’s Denver Post columns here and here. He manages to inject some humor and valuable insight in this grim situation.