Financial institutions must be allowed to fail, and the market must be allowed to return to equilibrium. -
Intellectual ConservativeFor those who join the President and House Majority Leader Steny Hoyer (D-Md) in complaining, "Doing nothing is not an option," consider
Malkin's piece on the bailout (her post provided my title).
The nation is scared and now is the perfect opportunity exploit a
strategy of manufactured crisis.
And yet, Keith Girard writes (WSJ):
The nation's top economic leaders repeatedly raised the specter of a Main Street meltdown on Capitol Hill this week to justify a $700 billion bailout for major financial institutions. But the message is pretty much ringing hollow on Main Street, where rising prices and the economic slowdown outweigh credit concerns, according to the National Federation of Independent Business (NFIB).
The NFIB's chief economist, William C. Dunkelberg, said in an exclusive interview this week that the organization's monthly survey of economic conditions has yet to detect anything that would indicate severe credit stress among its members. Only 2 percent of those polled said credit was their No. 1 problem in its August survey. Credit was mentioned as a problem by 10 percent of those surveyed, which is up from about 3 percent in 2002. But the change is normal. "Is credit tighter? Yes," Dunkelberg says. "But it's always tighter at the end of the quarter."
In comparison, during the 1981-82 recession, 23 percent of small business owners said credit was their No. 1 problem. Even during the stock market crash of 1987, which saw the Dow Jones Industrial Average plunge 22 percent in one day, credit was never a major issue for small companies, he said. "We looked at our data, and the economy kept going until 1991. It is true that AIG stock is down and bank stocks in people's portfolios may be down, but looking at the fundamentals of the economy, it's not even as bad as 2001," he says.
"Bank of America may not be making car loans because it's short on capital, but I can't imagine why it would be difficult to get a car loan, unless the borrower is not a good credit risk," says the NFIB economist. "If you are looking to borrow 100 percent of the retail value of the car, no, but car loans are available."
Suffering as a result of our past policies is inevitable:
American's are going to suffer. The poor will be hardest hit. As conservative pro-life Christians, we've often been criticized for not carrying about kids after they are born, this despite our extensive charitable work and outreach. I'd like to point out that big government, the kind with a program to solve every societal ill and help every depressed individual, is responsible for the current financial crisis.
The tender mercies of the monstrous government that brought us the Community Reinvestment Act has jeopardized the future of the very people they said were being helped.
The audacity is that our "leaders" have not learned their lesson. Democrats are attempting to skim their 20% of profits first and foremost off the top of any enormous financial-bailout benefit. It's like reading a non-fiction version of Atlas Shrugged.
There are other ways out of this current crisis that do not involve socialistic strategies built upon years of government intervention and motivated by public fear. Andy McCarthy quotes a friend with insight (HT: Michelle Malkin):
We all get it. It's bad out there. We're way over-leveraged.
Consumer debt is out of this world. Credit is tight at best. And
banks are insolvent. We need to take action. But darn it, we should
take the right kind of action.
(...) The Paulson-Democrat Wall Street Bailout will arguably make things WORSE, not better
(...) We may blow the best shot the federal government has to
use taxpayer money wisely to "work out" of the current financial
situation - getting it wrong will CREATE problems and HARM confidence,
because fundamentally underpinning this situation is the assumption
that the government can prevent a meltdown. If the plan fails, this
opportunity may well disappear.
(...) This plan would have government socialize losses - and
breaks the tie between risk and reward/failure. Certain companies need
to get wiped out - and doing so will be BETTER for remaining
investments.
When
government steps in preemptively and starts arbitrarily buying up
assets, the expectation is that it will do so again and again
And as for alternatives:
- how about reinforcing FDIC to give people confidence in their savings? Maybe more support for money markets?
- How about cutting corporate taxes or cap gains taxes?
- How
about buying up (or financing the purchase of) the AAA securities that
currently are having trouble moving but are not "toxic," in order to
increase liquidity and help with possible insolvency for healthier
institutions rather than the old line investment banks?
- How
about doing something about the silliness of the $62 Trillion Credit
Default Swap market (e.g. the margin requirements, etc...)?
- How about immediately changing mark-to-market rules?
- And
- heaven forbid - how about belt-tightening in Washington? Don't hold
your breath - but imagine what a signal that would send - a freeze in
discretionary spending, a moratorium on earmarks and a real plan to
educate America about entitlements and talk about the need to get our
fiscal house in order.
Finally, I leave you with the opinion of
Ivand Eland who brings free market insight to those clamoring for socialism:
Neither Republican socialism nor Democratic corporatism is the
answer to the current financial "crisis." The conventional mantra of
the Democratic and Republican presidential candidates is that this
problem was caused by a financial industry that was insufficiently
regulated. In fact, the crisis was caused by previous government
intervention and bailouts -- for example, FDR's bank holiday and the
creation of the Federal Deposit Insurance Corporation during the New
Deal and Bush's father's massive bail out of the Savings and Loan banks
during the late 1980s and early 1990s. If the financial sector is
regarded as too important to have difficulties or if particular
financial institutions are regarded as "too big to fail," they will
engage in reckless practices that will end in "crisis," thus leading to
demands for yet more government action to fix the problems that prior
government intervention caused.
This downward spiral must be broken. Financial institutions must be
allowed to fail, and the market must be allowed to return to
equilibrium. Such failures might very well induce a recession, but as
Herbert Hoover discovered, throwing more credit at a market with excess
credit only worsens the inevitable economic downturn. Let's just hope
the ill effects of this massive financial bail out don't get that bad.
Given the role of congress in creating this crisis, their actions now define
Audacity.