The AIG bailout by the Federal Reserve involves the FED “loaning” AIG $85 billion in exchange for nearly 80% equity in the company. Now, it is within the Fed’s charter to loan money; however, the fact that the Government has now nationalized a major private insurance company (although the Fed denies that this is what was done) is tantamount to socialism. There seems to be a gradual move for the government to take over these large companies and run them, when it was government “oversight” and regulation that caused this crisis to begin with. There is simply no legitimate reason that AIG should have this and not Lehman Brothers. The move is may have been necessary from a practical standpoint, as the failure of AIG would probably have caused several other major U.S. companies to fail as well, but it is a dangerous road we as a nation are embarking on with this new corporate socialism.
Posts Tagged ‘economy’
Posted by Sal on September 16, 2008
With the collapse of Lehman Brothers to Bankruptcy, and with Merrill Lynch being absorbed by Bank of America, our financial system is foremost on many people’s minds this week. Add to that the federal takeover of Fannie Mae and Freddy Mac last week, and the Bear Sternes collapse earlier this year, and we have a financial mess. All of this primarily has to do with the collapse of the mortgage market, as Bear Sternes, Merryll Lynch, and Lehman Brothers all had significant holdings in mortgage-backed securities that have sharply dropped in value. Both McCain and Obamaare calling for reform and increased government involvement and regulation into the financial sector. This is precisely the wrong prescription.
The problems we are seeing in the current mortgage crisis have very little to do with the free market, and more to do with government regulation. In a free-market system, there is risk and reward. It is natural that if a company is not run right, that company will fail, so there is every incentive to run the company correctly. Since Frannie Mae and Freddy Mac were government-backed, in the sense that there was always an understanding that the mortgage under-writings were backed by the U.S. government. In addition, the Federal Government, beginning with Bill Clinton and continuing with Bush, began mandating increased loans for low-income home buyers, creating the sub-prime industry that created billions of dollars in loans that people could not afford. (This is also to say nothing of the corruption and back-scratching between Fannie and Freddy and various Democrats.) It is because of this government intervention that we are in the crisis we are in. The Freddy and Fannie takeover was necessary, but as Larry Kudlow reports, it is a good thing that the government did not bail out Lehman Brothers. The concept of risk/reward has to remain in our free-market system, no matter what the short-term pain is.
We are in a financial mess — one that will take some time to resolve. It is not a crisis, depression, or recession. It will resolve itself, as the fiscal crisis’ of the past always have. The question is, are we going to make things worse with increased regulation, or are we going to reform, put sensible regulation where needed, but deregulate the mandates and allow the free market to work.
Posted in Politics | Tagged: Congress, Dodd, economy, Fannie Mae, Freddy Mac, Larry Kudlow, Lehman Brothers, McCain, Merill Lynch, Mortgage, Obama, Regulation, Sub-Prime, Wall Street | Leave a Comment »
Posted by Mike on April 10, 2008
The fact that The Corner’s David Freddoso can report economic data from 2008 compared to economic data from 1996 and juxtapose the statistics with Democrat quotes all in about a minute and half is proof positive of the media’s laziness, dishonesty, or both.
UPDATE: The Anchoress has a great roundup of this one, complete with cartoon.
Posted by Ryan on March 27, 2008
We’ve finally learned something (on the record for a change) about Democrat’s vision for the today’s ailing economy! Here’s a sample of Obama’s take on what he to do in tough economic times:
“To renew our economy — and to ensure that we are not doomed to repeat a cycle of bubble and bust again and again — we need to address not only the immediate crisis in the housing market; we also need to create a 21st century regulatory framework, and pursue a bold opportunity agenda for the American people…. We do American business — and the American people — no favors when we turn a blind eye to excessive leverage and dangerous risks…. If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling.”
OK, let me get this straight: Regulation. Government handouts. Ending the Business Cycle.
Been there, done that.
One of the things we learned from the 1970s (before Obama met Reverend Wright and while She Who Must Not Be Named was still wearing those dorky glasses) is that the more regulation the government imposes the less economic activity takes place from those targeted companies/industries, which will destroy job growth and diversification.
Plus, government hand-outs to the “struggling” might be good mid-20th Century populist/class-warfare politics, but we’ve seen the abject failure of wealth redistribution in our own country: “War on Poverty” anyone?
Back in the 1990s people were also talking about the end of the business cycle. I don’t want an end to the business cycle because, quite simply, that means the end of capitalism. Bad companies must be made to account, bad behaviors by consumers must be stymied by market realities, and bad investments must be punished if an economy is to learn and grow in the fastest and most natural way.
So, what did I learn about the Democrat candidates and the economy today?
Same old populist-socialist dribble that won’t fix anything but would continue the cycle of dependency. But that’s what I expected them to say. The bigger question to ask is:
Will John McCain take advantage of these scary policy positions that his opponents are putting forward on the record?