This sounds like a fantastic idea

You’ve surely heard by now that the federal government is looking at a $700 billion bailout of the financial industry.  Our government may even include foreign banks in the bailout.  How nice of us!

The way I see it, the whole credit crisis is a result of low interest rates and relaxed lending requirements.  We could argue over who’s to blame: liberals for mandating increased home ownership (which resulted in relaxed lending standards and unprepared debtors) or conservatives for lax regulatory oversight.  Such debating right now kind of misses the point because the truth is that the causes are complex and there is ample blame to spread around.

The easy money craze pushed up home prices to levels that everyone knew weren’t sustainable, but very few were willing to stand up and say something was not right.  The whole country was too busy lusting for double digit annual property value increases to recognize one of the incontrovertible facts of the market: with great risk comes great reward.  Switch risk and reward in that phrase and it is just as true.  If you’re realizing huge returns then you are almost certainly engaged in risky activity.  Nearly everyone played along and so nearly all of us played a role in the situation we face.

What is sadly ironic is that the federal government is the entity riding to the rescue.  Our country is already almost $10 trillion in debt.  As recently as 2003 over 16% of our country’s revenue was spent servicing debt.  And the solution is for our debt laden country to purchase nearly a trillion dollars of the most toxic, risky mortgages on the market?  Sounds like a great idea for banks.  Not such a great idea for taxpayers.  And what is really rich is that the goal is to free up credit markets so the easy money orgy that got us here can continue unabated.  The natural, and necessary, consequences of making bad decisions in a (somewhat) free market are removed.

This likely massive bailout comes on the heels of multiple individual bailouts.  The typical stated logic behind the previous bailouts was that the companies were “too big to fail.”  If that is the case and our government is committed to bailing out any of these massive companies if they encounter trouble then I say we not let them get that big to begin with.  You’ll be hard pressed to find a more resolute free market guy than me, but if the federal government is going to screw taxpayers every time a large company fails then it is reckless to allow them to become that large.  Define a threshold and force companies that cross it to break up.  To do otherwise places taxpayers at an unnecessary risk.

By the way, renters and fiscally conservative people should be absolutely livid.  The government’s actions are meant to, in part, shore up inflated housing prices.  If you’re trying to save for a house then you just got rear ended because your taxes are going to be used to keep prices higher than they should be.

It certainly appears that some kind of action was necessary to prevent an abrupt, massive meltdown.  I’m not privy to all of the information, so I’ll take the experts claims that something had to be done.  BUT, what has to, but probably won’t, happen next is that the air has to be let out of the bubble.