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OpenMarket: Subsidies and Bailouts

  • Why the Endless Bail-Outs are Making Things Worse

    October 31, 2008
    No surprise, argues Russell Roberts of George Mason University, the mindless, almost random federal bail-outs are going to leave us far worse off.  Writes Roberts:
    By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s. The next administration is unlikely to do any better. Mr. Bernanke is perhaps the greatest living authority on the Great Depression, yet he has failed to stem the damage. Messrs. Paulson and Bernanke are...
  • House GOP 'Rapid Recovery' plan spurs growth by changing long-term expectations

    October 31, 2008
    As soon as the elections are over, Congressional leaders are planning to have a "break the bank" party. On top of the $700 billion bailout that unfortunately both Republicans and Democrats supported, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid plan to call Congress back into a "lame duck" session in mid-November to pass a $300 billion "stimulus" package. The attitude seems to be, what's $300 billion for "Main Street" after we just approved $700 billion for Wall Street fat cats? But all the package is really likely to do is add $300 billion to Main Street's public debt without spurring economic growth. There is no reason to believe that the hodgepodge of programs Pelosi and Reid want the stimulus to fund -- from food stamps to unemployment benefits to infrastructire -- will be any more successful at jumpstarting the economy than the hundreds of billions spent...
  • From NRO: GM Wants a Piece of the Bailout

    October 30, 2008
    From the Editors at National Review Online:
    That $700 billion rescue package for the banks is in danger of turning from a safety net into a slush fund. The scent of money has attracted lobbyists for every interest group in Washington. Now comes word that Treasury secretary Henry Paulson might dip into the fund to bail out struggling automakers GM and Chrysler. If car companies can qualify for a piece of that $700 billion, then there are no theoretical constraints on its use.
    GM has many expenses, so one could imagine why they feel motivated to get a piece of the bailout.  How else will they pay their lobbyists and car show models? Of course GM also employs thousands of American workers, but those folks should consider the consequences of their...
  • Turning Responsible Citizenship into a Sucker's Game

    October 30, 2008
    Some people are hopelessly boring.  They save money, live within their means, don't buy too much house, pay their bills, and contribute to the community.  Then there are wastrals, who spend and borrow wildly and expect others to clean up after them.  The U.S. government is funded by the former but obviously spends an increasing amount of its time catering to the latter. Reports the Washington Post:
    Negotiators for the Treasury and Federal Deposit Insurance Corp. are nearing agreement on a plan to have the government guarantee the mortgages of millions of distressed homeowners in what would be a significant departure for the federal rescue program, which has so far directed relief exclusively to banks and other financial institutions. The plan, which...
  • Paying Dividends with Public Money

    October 30, 2008
    Normally corporate dividends--or executive salaries--should not be a matter of government concern.  But how about when the feds are forking over taxpayer money to encourage borrowing?  It turns out that the banks have taken the money (some more enthusiastically than others) and, well, used it for other things, such as buying other banks and paying dividends.  This has reduced the White House to whining that they are supposed to be getting out there throwing money at borrowers, any borrowers. But there are dividends to pay.  Reports the Washington Post:
    U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three...
  • Does a Foreclosure Moratorium Make Sense?

    October 30, 2008
    Despite some recent good news—like stocks recovering some value—politicians continue to believe they can solve the housing crisis through economic gimmicks.  The latest: a proposal to have a 90-day moratorium on home foreclosures. The last thing that anyone wants is more folks kicked out of their homes. But if banks don't recover some capital now, won't the crisis simply deepen? Just as much as struggling home owners want to stay in their homes, banks want those folks to stay in their homes.  Banks like it when people are paying their loans and only foreclose on homes only as a last result as it is—they're better at brokering loans than real estate. If taking control of a home and selling it on the market is already...
  • And the ride starts all over again...

    October 29, 2008
    Thee Federal Reserve lowered its key rate to 1%. Convinced that inflation is no-longer a problem, the Fed believes this is the time to help stave off a recession. This policy didn't work well when Greenspan tried in 2001 - it helped the jump in oil price and drove the dollar to fall against other currencies - oh and it made lending for home super cheap. Combined with aggressive lending from the Federal Reserve, a Fannie and Freddie newly reflushed with cash to buy up mortgage backed security , and the federal government going on a mortgage buying spree... Does this sound like 2002-2006 all over again, just a bit bigger? Are our policymakers really this dense....this is truly criminal.
  • The More the Government Does, the More Harm it Does

    October 26, 2008
    At least, that appears to be the lesson of Franklin Delano Roosevelt's misnamed New Deal.  New research by two UCLA economists suggests that it was FDR's counterproductive manipulation of the economy that lengthened the economic crisis.  Reports UCLA:
    Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt. After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian...
  • Atlas Network joins

    October 24, 2008

    CEI is happy to announce that the Atlas Network has joined our efforts to stop future reckless spending on the part of Congress, this administration, and the next at

    At you'll find news from a diverse network of independent think tanks, scholars, and friends that collaborate with Atlas to promote individual liberty, economic freedom, and limited government under the rule of law.  Now you'll find their...

  • October surprise -- existing home sales up in September

    October 24, 2008

    Surprise, surprise. Existing home sales were up in September 2008. According to Reuters,

    Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell,

    The National Association of Realtors, which released the data, said the gains are fairly widespread:

    Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains. “The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode...


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