Just as one lie leads to another, imprudent government intervention in the free market leads to further imprudent government intervention in the free market. Each step of the way, we are told we have no choice but to do what the government wants us to do.
The original transgression that led us to the current crisis was committed by elected officials in Washington who wanted to buy additional incumbency insurance for themselves by saying to voters: We will help you buy a house.
They worked to accomplish this through legislation (such as the Community Reinvestment Act) that pressured banks to make riskier loans and through tax-exempt government-sponsored enterprises Fannie Mae and Freddie Mac, which started buying up riskier loans (so the original lenders did not have to carry the risk) and wrapping them into mortgage-backed securities (which mixed bad loans with good loans).
"Because these two companies were chartered by Congress, many believed they were guaranteed by the federal government," President Bush said when he first announced his plan for a $700 billion bailout of the financial industry. "This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."
Right. Then President Bush did guarantee them.
So we have gone from government pressuring banks to make riskier mortgages, to government-sponsored enterprises buying riskier loans from banks to facilitate even more risky lending, to government buying stakes in the banks themselves.
"We are acting with unprecedented speed, taking unprecedented measures that we never thought would be necessary," Paulson said at the end of his announcement.
What will be the next unprecedented measure government officials never thought would be necessary?
Having murdered his king and then his friend Banquo, Shakespeare's Macbeth, abandoning all consideration of right and wrong, decides: "I am in blood / Stepp'd in so far, that, should I wade no more, / Returning were as tedious as go o'er." He learns -- in the end -- he made the wrong decision.
Americans have a decision to make, too. Do we want to wade further into government dependency and government intervention in our economy? Or do we want to turn back now to the shores of individual responsibility and freedom?
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