Andrew Clem home
Andrew Clem banner

Blog post


Monthly archives
(all categories)


May 1, 2008 [LINK / comment]

"Worst decision" by the Fed?

I was very dubious of the buyout of Bear Stearns by J.P. Morgan, made possible by emergency financial support from the Federal Reserve, but a former senior policy adviser made an exceptionally harsh criticism of the March 14 move. Vincent Reinhart, who advised Federal Reserve Chairman Ben Bernanke as well as his predecessor Alan Greenspan, called that rescue operation the "worst policy decision in a generation." Gone is the pretense that the Fed serves as an "honest broker" in preserving monetary stability. What's worse is that the Fed plans to start making loans to investment banks, going outside its traditional domain of depository institutions. Getting involved in such a high-risk sector sets a very bad precedent for the future. See Washington Post.

We need to remember the close connection between market economics and individual freedom, and that capitalism fosters liberty only as long as the government is restrained from playing favorites. Once it starts intervening for the sake of stability, there is a slippery slope and it gets hard to avoid getting ever-more deeply entangled in business affairs. The "moral hazard" that arises whenever the Fed makes emergency loans -- insulating firms and individuals from the consequences of their bad decisions -- has been forgotten by most people. Once voters get used to the idea that politicians can be induced to help them out in time of "need," then we have turned away from our (small r) republican roots and embraced the comforting allure of despotism. "Crony capitalism" or "compassionate conservatism" -- whichever way you look at it, the whole thing stinks like rotten eggs.

Posted (or last updated or commented upon): 02 May 2008, 12: 44 AM

(unformatted URL)
      .



This post is over a week old, so comments are closed.


© Andrew G. Clem. All rights reserved. Your use of this material signifies your acceptance of the Terms of use.


Hits on this page (single blog post) since July 2, 2007:

Category archives:
(all years)



This (or that) year's
blog highlights

Blog highlights have been compiled for the years 2010-2012 thus far, and eventually will be compiled for earlier years, back to 2002.


Explanation

The "home made" blog organization system that I created was instituted on November 1, 2004, followed by several functional enhancements in subsequent years. I make no more than one blog post per day on any one category, so some posts may cover multiple news items or issues. Blog posts appear in the following (reverse alphabetical) order, which may differ from the chronological order in which the posts were originally made:

  1. Wild birds (LAST)
  2. War
  3. Science & Technology
  4. Politics
  5. Latin America
  6. Culture & Travel
  7. Canaries ("Home birds")
  8. Baseball (FIRST)