You call this a free market?

Mr. Smith — Mon, 08 Sep 2008 17:47:22 +0000

So much for the theory of “free market capitalism.” As I discuss in chapter 8 “Economic Reform,” the proponents of so-called “free market” ideology seem to flip-flop regularly: To the economic pundits at the Wall Street Journal and the White House, free markets are good as long as they are making a profit, but as soon as they start losing money, suddenly it becomes the taxpayers’ responsibility to bail out financial institutions which made poor decisions.

First the Federal Reserve plunked down $30 billion to back the buyout of Bear Stearns, arguing that failing to do so would cause a cascading ripple effect throughout the financial markets.

Today we hear that the government is at it again: committing to provide some $200 billion cash to prop up the failed mortgage giants Fannie Mae and Freddie Mac.

An astute observer might notice that the concept of “free market capitalism” is applied quite selectively by the talking heads in the media and the government. The concept of the “free market” is used to explain why, for example, insurance companies should be allowed to screw over their customers (why create a public health care system when insurance companies are making so much money denying service?), but when it looks like a major bank might fail, oh, well, then, the government clearly has to step in and provide the taxpayers’ money to the banking system to prevent its collapse.

The ideology of the free market has failed. The time has come for real reforms, a massive overhaul of our government and economic institutions. A detailed plan is available in chapter 8 of my book.

Principles » Fannie Mae

You call this a free market?