Friday, September 19, 2008

Fed Bailout A Huge Mistake

As the housing market continues to slide and many financial institutions are on the verge of collapse, the the government has stepped in to save the day. Unfortunately that is all they are saving. While it appears to be a solution, it is merely a short term one that will lead to further troubles down the road, just as unethical business practices during the "boom" have led to current conditions. Henry Blodget writes, "the market's up huge on this news. The moves should . . . create a general 'time out' for the panic to recede." A government bailout will keep AIG, Freddie Mac, Fannie Mae and others solvent for now, but will wind up costing taxpayers more than is being bargained for. These companies have followed trends and poor business practices, which is why they are on the ropes now. Bailing them out prevents them from learning from their situation and acclimating to the new market. We need the market to adjust on its own.

There are a number of trends that have led to this economy: 1) A consumer-driven economy (businesses have pushed consumerism and profits before everything else and are hurt when consumption is curtailed), 2) focusing on the bottom-line to the exclusion of customer and employee concerns (this leads to mismanagement, poor overall performance, and falsification of earnings), 3) lack of personal and corporate responsibility (looking for bailouts after making poor investments or buying too much house). We are paying the price for our ignorance, and we must pay it. Let the economy adjust, and focus on honest business practices. This is the only way to foster a strong dollar again.

Hit-and-run politicking: McCain has chastised the Fed for bailing out financial institutions, and he's right. Let them go out of business if they can't adjust. Other companies will take their place. Obama, on the other hand, supports government help for both financial companies and for working families. His plan would vastly increase taxes, placing responsibility for the few's bad choices on the many. His plan is Socialism at its finest. If we have learned anything from the Russians, Cubans, North Koreans and Chinese, fiscal Socialism does not work. Instead, we must allow capitalism to run its course with little government involvement. Obama would run this country's economy into the ground if he were allowed to.

Another (similar) view:

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