The Big Bailout Lessons
By Harold Meyerson
WashPost
Wednesday, December 31, 2008
Two things we learned about our politics and our economy in 2008:
Lesson One: If it's big and you don't regulate it, you end up nationalizing it.
One of the major lessons of the year is that unregulated and underregulated capitalism ends up confronting democratic governments with a subprime choice: Either let a major institution go down and watch as chaos follows (the Lehman option) or funnel gobs of the public's money into such institutions to avoid such Lehman-like chaos.
It was the Bush administration, more than the government of any other nation, that demonstrated this iron law of economics, for it was the Bush administration that was most committed to laissez-faire economics. The White House and the Treasury, under George W. Bush and Bill Clinton, let an entire unregulated financial world rise alongside the more regulated consumer banks and brokerages. Uniquely under Bush, however, the regulation of regulated banks and brokerages broke down as well. In 2000, the Justice Department filed 69 cases of securities fraud based on Securities and Exchange Commission investigations. In 2007, it filed nine. And this year, Bush's Office of Thrift Supervision allowed IndyMac Bank to doctor its books so it wouldn't appear to be as insolvent as, in fact, it was.
(More here.)
WashPost
Wednesday, December 31, 2008
Two things we learned about our politics and our economy in 2008:
Lesson One: If it's big and you don't regulate it, you end up nationalizing it.
One of the major lessons of the year is that unregulated and underregulated capitalism ends up confronting democratic governments with a subprime choice: Either let a major institution go down and watch as chaos follows (the Lehman option) or funnel gobs of the public's money into such institutions to avoid such Lehman-like chaos.
It was the Bush administration, more than the government of any other nation, that demonstrated this iron law of economics, for it was the Bush administration that was most committed to laissez-faire economics. The White House and the Treasury, under George W. Bush and Bill Clinton, let an entire unregulated financial world rise alongside the more regulated consumer banks and brokerages. Uniquely under Bush, however, the regulation of regulated banks and brokerages broke down as well. In 2000, the Justice Department filed 69 cases of securities fraud based on Securities and Exchange Commission investigations. In 2007, it filed nine. And this year, Bush's Office of Thrift Supervision allowed IndyMac Bank to doctor its books so it wouldn't appear to be as insolvent as, in fact, it was.
(More here.)
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