Wednesday, September 24, 2008

McCain suspends campaign

The big news today is that Senator John McCain is suspending his campaign to focus on the congressional bailout. CNN and Fox are both on it.

That's news, I guess. From what I'm reading, the Obama camp is trying to decide whose idea it was to suspend the campaign.
But McCain’s camp said Obama never reached McCain in the morning call because he was meeting with economic advisers and talking to leaders in Congress. Afterward, McCain phoned Obama and expressed deep concern that the plan on the table would not pass as it currently stands. He asked Obama to join him in returning to Washington to lead a bipartisan effort to solve this problem. Obama said the two still plan to issue a joint statement.
I hate to tell the Obama campaign, but it looks like the statement has already been made.

I'm concerned too, as we all are. I'm concerned that Congress is asking the wrong question. The question they're asking seems to be; "What can we do about this mess?", when the question should more properly be "Should we do anything about this mess?"

Ron Paul says it best in his recent statement on the crisis.
Every government bailout or promise thereof leads to moral hazard, the likelihood that market actors will take ever riskier actions with the belief that the federal government will bail them out. Bear Stearns was bailed out, Fannie and Freddie will be bailed out, but where will the line be drawn? The precedent has been established and the taxpayers will end up footing the bill in these cases, but the federal government and the Federal Reserve lack the resources to bail out every firm that is deemed “too big to fail.” Decades of loose monetary policy will lead to a financial day of reckoning, and bailouts, liquidity injections, and lowering of the federal funds rate will only delay the inevitable and ensure that the final correction will be longer and more severe than it otherwise would. For the sake of the economy, I urge my colleagues to resist the temptation to give in to political expediency, and to oppose loose monetary policy and any further bailouts.
Indeed. Congress is setting a dangerous precedent here in not letting companies fail.

1 comment:

Rivrdog said...

I usually agree with the "free market" people who say let the chips fall where they may, but this time, the risk to the entire world's money supply is so great that it is foolish not to consider intervention to save the current system.

I think most folks are clear on the fact that the system can't and won't save itself, but a sudden retraction of at least 40% in the money supply which we would have faced, as early as next week, would have thrown the entire world into a turmoil it probably wouldn't have recovered from peaceably.

The intervention being brewed up in DeeCee is necessary, but so are reforms to require much more transparency in bank dealings with each other.