I probably should have posted something about the bailout ages ago, but more influential people than I have been saying pretty much everything I wanted to say... and the bailout still passed. Nevertheless, this has to piss off any principled, free-market conservative:
Community banking executives around the country responded with anger yesterday to the Bush administration's strategy of investing $250 billion in financial firms, saying they don't need the money, resent the intrusion and feel it's unfair to rescue companies from their own mistakes.It is bad enough that the government decided to create a bailout on this scale to begin with. But forcing banks that don't want the help to take it anyway in order to legitimize the program is positively Orwellian. Here is some detail from page two, just to show that I am not exaggerating:
But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.
Federal regulators said they did expect some banks to volunteer, though none stepped forward yesterday. But they added that they would not rely on volunteers. Treasury will set standards for deciding which banks can be helped, and the regulatory agencies will triage the banks they oversee: The institutions faring best and worst will not receive investments. The institutions in the middle, whose fortunes could be improved by putting a little more money in the bank, will be pushed to accept the money from the government.I realize that some sort of intervention was pretty much inevitable, given the leftward migration of the country in recent years and the abysmal ignorance of financial principles shown by even conservative politicians. But is it too much to ask that at least some of the lessons of history might be learned? Apparently so:
Peter Fitzgerald, chairman of Chain Bridge Bank in McLean, said he was "much chagrined that we will be punished for behaving prudently by now having to face reckless competitors who all of a sudden are subsidized by the federal government."
At Evergreen Federal Bank in Grants Pass, Ore., chief executive Brady Adams said he has more than 2,000 loans outstanding and only three borrowers behind on payments. "We don't need a bailout, and if other banks had run their banks like we ran our bank, they wouldn't have needed a bailout, either," Adams said.
President Bush, in introducing the plan, described the interventions as "limited and temporary."Mr. Bush showed quite clearly that he did not understand judicial conservatism when he appointed Harriet Miers to the Supreme Court. His comment here shows that he does not understand the words "free market" any better.
"These measures are not intended to take over the free market but to preserve it," Bush said.
The initial bailout was justified on the grounds that we need to prevent a second Great Depression. As noted below, government intervention was one of the chief factors in exacerbating the problem in the '30s. Hoover, an ineffective, interventionist, Republican president was replaced by Roosevelt, an even more aggressive Democratic interventionist. If recent polls are correct, we may be following exactly the same pattern in replacing Bush with Obama.