Principles

The recent turmoil in the stock market was temporarily relieved, for a few days, when the government announced a massive plan for intervention.  President Bush, at the behest of Treasury Secretary Henry Paulson, has sent Congress a request for $700 billion to buy up devalued mortgage-backed securities and provide liquidity to financial institutions.

What does this mean?  Buried in the technical terms which put off many readers are a few simple facts.

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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.
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