David

Karki

Read David's bio and previous columns here

September 29, 2008

If We Must Have the Bailout, At Least Follow These Principles

As of this writing, it is unclear what shape the credit bailout bill will take, or even if there will be a bill at all. But as this vital debate takes place, here are some principles that I feel must be hewed to in crafting a solution. And if they are not, then it would be better to pass nothing at all.

If we are to fork over some $700 billion, this situation cannot repeat itself. It's bad enough to be made to pay for other people's irresponsible excesses. Causing them to not learn their lesson by papering over the consequences would be adding criminality on top of stupidity.

Government – primarily Rep. Barney Frank and Sen. Chris Dodd – told Wall Street it had to lend to risky borrowers, those borrowers unsurprisingly defaulted, and naturally Wall Street went back to Washington and demanded to be made whole again, and donated big time to those in a position to make it happen. (Senator and presidential candidate Barack Obama was the second-biggest recipient, not that his media worshippers will report it.) Simply allowing these same scummy politicians to shovel our hard-earned money at this and walk away free to perpetrate it again would be unconscionable.

There must be protection so that those lenders of a mindset to refuse to follow Congress' silly marching orders (and admittedly, some weren't) won't be unfairly prosecuted for it. It's not “discrimination against the poor” to refuse a huge loan to someone who can't possibly pay it back – it's common sense! And if they attempt to grease the skids, then both parties ought to be prosecuted to the full under federal bribery statutes. Putting a few big names, such as Dodd and Frank and their credit-sector solicitors, under striped sunlight would likely bring the rest into line in fairly short order.

And from there, the market provides all the protection needed. Borrowers looking for bigger mortgages than they can handle won't be able to get them. “Predatory lending,” such as there is, is already prosecutable under existing fraud laws. The incestuous relationship between lending bigwigs and the congressmen who purportedly oversee and regulate them would be broken.

Economic hardship is no justification for trashing the Constitution and allowing a government takeover of the entire credit industry. One need not be a genius to see where having everyone going to government to obtain capital to invest would lead, because we're seeing it right now on a smaller (relatively speaking) scale. Fannie Mae and Freddie Mac were used as barely disguised vessels for leftist income redistribution schemes, and it was unsustainable to the tune of $700 billion in very little time. Having government seize the credit industry would be like rewarding someone for recklessly opening a sluice gate by letting them blow up the entire dam.

Government is already some $70 trillion in the hole in upcoming years, given entitlement obligations and existing debt. There isn't enough money in the universe to fund all of this, and a very harsh day of reckoning lies ahead in the very near future. Adding the entire credit industry on top of this would be the definition of insanity. How many trillion more can we let Congress throw away? How bad does that inevitable crash have to be? Must we make it worse still?

Furthermore, only those items meeting with government's approval would receive funding. Socialist credit would quickly result in decisions based on what was being invested in, and used as a social engineering tool for what those in power like, just as the tax code already is. Redistributing income is as much about altering and controlling behavior as anything economic, and in that regard this would further open a door that's already been opened much too far.

I would rather be poor, hungry and free than fed, housed and under despotic socialist rule. We've already made the error of allowing Franklin Roosevelt to use the Great Depression as an excuse for expanding government well beyond its constitutional limits. (And it didn't even solve the problem. World War II did that.) In some ways, we're still paying for it some 70 years later. Let us not put financial well-being ahead of freedom. Even the most comfortable confinement is still imprisonment.

We cannot have those who followed the rules punished and those who broke the rules rewarded by seizing from the former to lavish upon the latter. It's not only morally obscene, it also creates a perverse incentive for even more irresponsible behavior. And it will eviscerate what the bailout is supposed to accomplish, providing a motive for doing it again. Just as one does not indulge an already spoiled child, so too must those who got us into this mess be the ones who suffer the lion’s share of the consequences.

Perhaps, given that government, and liberal congressmen in particular (Rep. Barney Frank and Sen. Chris Dodd) are the main cause of this, it would be fitting to see the $700 billion come from their budget rather than all of ours. Congress spends $3 trillion of ours every year; I would think they could live with a paltry $2.3 trillion once. Perhaps a few firms should be allowed to go under, just to send a message to the rest that this will be their fate if there is a “next time around.” And perhaps some of those too stupid to know what mortgage they can't afford need to rent a damn apartment from now on.

But all of those Americans who worked hard and played smart and handled their own responsibilities should not  be the ones to be punished with a $700 billion fine.

© 2008 North Star Writers Group. May not be republished without permission.

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