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

1.  The long-running Republican war against regulations on financial markets created this crisis.  Touting “free markets” and the “invisible hand” they have allowed banks to do whatever they wanted for the past decades, and the banks by way of saying thank you have run our national economy into the ground.

2.  The ideology of the free market has failed utterly.  The banks, having created the means of their own demise, are now whining for help.  The same banks that foreclose on your house if you miss mortgage payments and set the collections agents on you if you’re late on your credit card payments: these are the banks that are now complaining they don’t have enough money.

3.  The government is bailing out the banks.  The “free market” requires a massive government bailout to continue being free.  It must be propped up artificially or else it might fail completely.  The “free market” clearly does not work.  See chapter 8 of my book for extensive economic reform proposals.

4.  The Treasury Secretary stated that by buying up mortgage-backed securities with Federal funds, the government would be addressing “the root cause of our financial system’s stresses.”  This is offensively elitist.  If the problem is that mortgage-backed securities have lost their value due to homeowners defaulting on their mortgages, then the root of the problem is that homeowners are defaulting on their mortgages.  Right?  So if we were to address the root of the problem, it would not be by giving $700 billion to the banking industry.  Truly addressing the root of the problem would mean using that money to help homeowners who can’t afford their mortgages.

5.  By refusing to even discuss the true root of the actual problem, our government’s leaders have demonstrated once again that their primary concern is to protect the interests of the wealthy elite, and the middle and lower classes be damned.

(This post is a continuation of an earlier topic, “You call this a free market?” which was written when the government bailed out Fannie Mae and Freddie Mac.)

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.