From left, Henry M. Paulson Jr., the Treasury secretary; Ben S. Bernanke, the Federal Reserve chairman; Christopher Cox, the Securities and Exchange Commission chairman; and James Lockhart III, the director of the Federal Housing Finance Agency.
A collection of free market and capitalist critiques of the current "financial crisis" and proposed bailout.
from Carpe DiemWell here we are in September and bank credit continues to look very robust. As Robert Higgs points out consumer loans are up, commercial and industrial loans are up, even real estate loans are up. Overall, total bank credit is up with just a slight sign of leveling off in recent weeks. So where is the credit crunch?
from Marginal Revolution
The other, more fundamental flaw in the nation’s economy—consumption backed by debt instead of savings—also originated largely as a result of government policy. It has to do with deficits and debts that we were told did not matter, entitlements that we were told were fully funded, and borrowing guarantees that we were told were only a “last resort.” The funny thing about last resorts is that they always get the last laugh.
That malinvestments must now be liquidated merely reflects the mistakes made in the past, induced by bad government policy at the Fed and other credit-related agencies, such as Fannie and Freddie. Of course, some of the necessary adjustments will be painful for the parties directly involved. But the huge bailout now beingconcocted in Congress will only compound the errors of the past by keeping some malinvestments on life support, deferring the day that lenders must write off bad debts, and preventing the entire financial system from returning to a semblance of economic viability without ongoing subsidies and bailouts that impoverish the taxpayers and threaten the entire economy.
from Credit is Flowing, Sky is Not Falling, Don't Panic by Robert Higgs
Of course, everyone engaged in this hysterical flailing will assert that the objective is only to save capitalism in a crisis. Such government saviors always make that claim, oblivious to its absurdity. Franklin D. Roosevelt and his gang claimed to be saving capitalism, too, but look at what was left of it when they had finished their work.
from Does Wall Street Have a Death Wish? by Robert Higgs
The focus on regulation, narrowly defined, distracts attention from all the ways that the government has made the financial and housing industries unstable through guarantees and other privileges. Those guarantees systematically transferred the risk of dubious mortgage lending from bankers to taxpayers. It’s a classic case of Baptists and bootleggers, Bruce Yandle’s term for when moralizers (promoting, for example, the “American dream through home-ownership for all”) and rent-seekers (the building, banking, and real-estate industries) implicitly team up to push government intervention.
Admittedly, we do need protection from recklessness. But oddly, the same people who condemn Wall Street for its irresponsibility support government bailouts -- even as they say bailouts are a necessary evil. When will these folks see that the promise of rescue encourages recklessness? The best way to discourage it is to make clear that no one is too big or important to fail. Market discipline is the best protector of the public. But that requires laissez faire-- no privileges whatever.
What now? First: no bailout! Cut the GSEs loose and let them do what other businesses do on hard times: renegotiate contracts and revalue assets. Will there be another Great Depression? Recall that what turned a recession into the Great Depression was the Federal Reserve’s deflation of the money supply. A bailout is not required to avoid that catastrophic mistake.
Failure of Social Engineering?
sourceFor decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac -- who in turn pressured banks and other lenders -- to extend mortgages to people who were borrowing over their heads.
The Economic Crisis: Clearing the Fog by Charles Krauthammer
More than a negligible amount of the blame for the mortgage meltdown can be traced back to multiculturalism: government-mandated affirmative-action lending, demographic change, illegal immigration, and the mind-numbing effects of political correctness. The chickens have finally come home to roost.
The Mind-Numbing Effects of Political Correctness by Mark Perry
Sources for free market commentary:
Foundation for Economic Education
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