Financial Rescues Show That Faith in Free Market Is Shaken
By Steven Pearlstein
Washington Post Staff Writer
Friday, September 12, 2008
Self-reliance. Individual responsibility. A faith in free markets and a belief that people should have the opportunity to fail or succeed on the basis of their hard work and ingenuity. These are qualities that have been as central to the national identity as they have been to the American economic model.
Which is why it is so extraordinary that the government now finds itself hip-deep in the direct management of the financial system, rescuing four of the country's biggest financial institutions -- Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers -- from the harsh discipline of markets and the consequences of their own misjudgments.
This unprecedented intrusion of government is coming in the waning days of the administration of a Republican president who made privatization, deregulation and a faith in free markets the centerpiece of his economic policies and of his political agenda.
But now, facing the very real risk of a global financial meltdown and the prospect that he could go down in economic history compared to Herbert Hoover rather than Ronald Reagan, the president and his appointees have decided to set aside their principles in favor of economic and political pragmatism.
It was only a decade ago, after the heads of some of Wall Street's biggest banks and investment houses were invited to a meeting at the Federal Reserve Bank of New York and merely encouraged to mount a private rescue for a failing hedge fund, that there were howls of protest from both the left and the right about undue interference. Although no public money was involved, nor any exercise of regulatory powers, the Fed's behind-the-scenes effort to prevent the collapse of Long-Term Capital Management was seen as an abandonment of free-market principles.
Today, those objections seem almost quaint.
(Continued here.)
Washington Post Staff Writer
Friday, September 12, 2008
Self-reliance. Individual responsibility. A faith in free markets and a belief that people should have the opportunity to fail or succeed on the basis of their hard work and ingenuity. These are qualities that have been as central to the national identity as they have been to the American economic model.
Which is why it is so extraordinary that the government now finds itself hip-deep in the direct management of the financial system, rescuing four of the country's biggest financial institutions -- Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers -- from the harsh discipline of markets and the consequences of their own misjudgments.
This unprecedented intrusion of government is coming in the waning days of the administration of a Republican president who made privatization, deregulation and a faith in free markets the centerpiece of his economic policies and of his political agenda.
But now, facing the very real risk of a global financial meltdown and the prospect that he could go down in economic history compared to Herbert Hoover rather than Ronald Reagan, the president and his appointees have decided to set aside their principles in favor of economic and political pragmatism.
It was only a decade ago, after the heads of some of Wall Street's biggest banks and investment houses were invited to a meeting at the Federal Reserve Bank of New York and merely encouraged to mount a private rescue for a failing hedge fund, that there were howls of protest from both the left and the right about undue interference. Although no public money was involved, nor any exercise of regulatory powers, the Fed's behind-the-scenes effort to prevent the collapse of Long-Term Capital Management was seen as an abandonment of free-market principles.
Today, those objections seem almost quaint.
(Continued here.)
Powered by Blogger
0 Comments:
Post a Comment
<< Home