Although published during the 2008 presidential campaign, Michael Bauman's essay on government bailouts is probably more relevant now than it was then. Mike, as some of you know, is a frequent commentator to WWWtW. Here are some excerpts:
The government does not bail out anyone. Taxpayers do. The government just decides to which corporations they want to redistribute our money.
Because I know better than does anyone else in the world what I want and need from the marketplace in exchange for my money; because I am the person most well-informed about my own needs, resources and values; and because I, therefore, can do the best job of investing my money effectively for my own highest good; I want to decide where my money goes. I want every individual to decide where his or her money goes. If it goes where each one thinks it does them the best service, the aggregate result will be better than if some government bureaucrat decided on everyone else's behalf where it ought to go....
Even though the government insists otherwise, it cannot rescue capital by means of bailouts because government has nothing to work with except what the taxpayers give it. When government grants bailouts, it is not "rescuing capital." It is simply reallocating and redistributing taxpayer capital. "Rescuing" and "redistributing" are not the same. Redistributing is all the government can do, and redistributing does not work.
Put differently, in recent weeks government has wasted many, many billions of taxpayer dollars, poured that capital down the drain, and with no appreciable progress to show for it. The system is still not liquid. Credit is still frozen. Nothing is rescued -- not credit, not capital. Had the taxpayers themselves spent those hundreds of billions of dollars in their own privately best way, the economy would now be far better off than it is.
Government caused the problem we face, and in trying to solve the problem it caused, it made that problem far, far worse. You cannot -- you absolutely cannot -- find a solution by looking to Washington. The DC politicos are so backwards on the point that some of them actually say this problem was caused by deregulation, as if we needed more government involvement, not less. Government intervention is at the root of this crisis, not at the root of its cure.
How did government cause this problem? (1) By putting economically foolish incentives and regulations in front of lending institutions, thus inducing them to grant mortgages to folks whose financial resources could not reasonably be expected to sustain them, (2) by encouraging those financially under-qualified folks to take on mortgages beyond their financial reach -- with disastrous personal and public consequences, and (3) by trying to fix the crisis it created with even more idiotic policy interventions, like massive bailouts in the wake of the crisis those countless mortgage failures caused. The arrogant ignorance of bureaucrats, the monetary fine-tuning of state financiers, and the personal aspirations of politicians seeking votes cannot put this crisis behind us. They put this crisis before us.
Rather than changing the mortgage rules for minority borrowers -- as if racial or ethnic background were an economic qualification -- government do-gooders should have stayed out of the mortgage business from the beginning, and declined to follow up their initial failure with another. Had they done so, we would be better off all around.
You can read the whole thing here.