The bailout passed!
When so many politicians speak with one voice in support of the biggest act of government intervention in the economy in generations, I cringe.
Everybody talked about the "freeze" in the credit markets, but why, I wonder, were the cable news programs that repeated the credit-freeze mantra pausing for commercials from companies trying to lend me money? Ditech and LendingTree still hawk mortgages at under 6 percent. Some credit freeze.
Economist Robert Higgs of the Independent Institute looked at the credit numbers kept by the Federal Reserve. He writes: "Although certain financial institutions are undeniably in deep trouble -- difficulties of their own making ... -- credit markets in general have not ceased to operate. Moreover, lenders are extending credit in historically great amounts".
Maybe this is why CNN business reporter Ali Velshi broke ranks when reporting on "dried up" credit and said, "When I say 'dried up,' I don't mean there's no money. But you'd better have good collateral and good credit."
What's wrong with that?
To those who say that without banks nobody can borrow, economist Steven Landsburg offers this response: "Banks don't lend their own money; they lend other people's (their depositors' and their stockholders'). Just because the banks disappear doesn't mean the lenders will. Borrowers will still want to borrow, and lenders will still want to lend. The only question is whether they'll be able to find each other [A]s any user of Match.com can tell you, the technology for finding partners has improved since [the 1930s]. When a firm wants to raise capital, why can't it just sell bonds over the web? Or issue new stock? Or approach one of the hedge funds that seem to be swimming in cash? Or borrowabroad?"
I suspect that the bailout will do more harm than good, like "aiding" an alcoholic by giving him booze. It perpetuates the moral hazard produced by government guarantees that created the problems in the first place (http://tinyurl.com/5yc4fk). It acts as an enabler by giving more money to opportunistic lenders who assumed they'd be bailed out. And of course the politicians made a bad bailout bill worse by adding in tax breaks for stock-car racers, movie producers, "alternative" energy, etc. Then they insisted that all health insurance must cover mental illness, a requirement that will launch an orgy of fraud and make health insurance unaffordable for millions. The conceit of the anointed knows no bounds.