Wednesday, September 17, 2008

More Bad News

Well, so much for the Fed drawing a line. We, the taxpayers, are now on the hook for yet another company's poor judgement. And what message does this send to other similar institutions throughout our nation? The message is that, if you're a big enough corporation, the government will bail you out of whatever risks you take. So much for capitalism.

Many will argue that this was yet another necessary step to keep our economy stable, but I disagree. Capitalism is all about taking risks and reaping either the rewards or the consequences - take away one and the other will disappear as well. This is very bad news for our nation. The federal government now owns the largest insurance holding company in the country - that is a frightening reality. The U.S. government is not in the insurance, or any other business. Things are getting out of control, and those in charge have to be very careful, considering that this is completely uncharted territory. Read the link above in full for a very good analysis on what actually occured yesterday. As Blackhedd notes at the end of his post, some crucial decisions will have to be made in the coming months,
"There’s one more key thing I want to say, which reflects the fact that the AIG bailout is one of the most unprecedented things the government has ever done in peacetime.

The United States must not remain in the insurance business.

We’ve embarked, on one day’s notice, on precisely the path that free-market advocates consider a nightmare scenario. The largest insurance company in America is now owned and operated by the government, and has nearly unlimited access to cheap capital by virtue of the credit-quality enhancement provided by the Fed line of credit.

If you were one of AIG’s competitors, wouldn’t you be feeling a little bit like Tokyo when Godzilla is in town?

That’s the great hazard faced by the government now.

The only permissible course of action is for the feds to explicitly and openly put AIG on a path to liquidation."
This situation makes the upcoming election all the more important. What kind of president and congress do we want in Washington while the government is in such a dangerous position? Do we want a president who favors even more government involvement in every aspect of society making decisions like this?

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