When government people say things like this, it is always a precursor to the government proposing itself as the solution to the problem. The problem is so dire, that only the government can solve it. Of course they will need more money and more power to solve the problem. Oh, and if you don't think this is all true, then you are too dumb to understand the problem or you are just un-American because you don't care about all of the Americans who could be hurt by this grave danger.
Mr. Dave Winer makes the point that the current administration has used this argument before. Only then it was Colin Powell making the case for war in Iraq. Now it is Henry Paulson doing the same thing but with regards to the banking meltdown. Dave is right on all of this. He then goes out of his mind by suggesting that Bush/Cheney should resign, Nancy Pelosi be made President, and Paulson's plan to move right ahead. The problem is not just Bush/Cheney, and Pelosi is definitely not the solution. The problem is Paulson's request for power and money. It's like saying it would have been ok to listen to Colin Powell and attack Iraq, but only if Al Gore would have been president. It didn't matter who was President, attacking Iraq was wrong in every possible way.
Of course Ron Paul has some interesting things to say about the bailout. His opinions are largely grounded in the Austrian economic theory that the government makes business cycles more extreme (bigger booms and bigger busts) by causing malinvestments, like buying subprime mortgages for example. Like all things in Austrian economics, it is a matter of "belief" as these are statements that are purposely impossible to scientifically verify. However, it is hard to dispute that the U.S. government has encouraged high risk loands for the purpose of buying real estate, and that the very financial institutions who did this most are now the ones that are going bankrupt.
The point is that our government does not have a good track record here. Maybe it has been the main source of the problem, as Paul suggests, or maybe not, but it certainly has been part of the problem. Now it wants unprecedented (in this country at least) power and money to solve the problem that it has been at least complicit in. Given that, how can we support this idea?
Oh, but what is the alternative? I don't know, and I don't think the government knows either. Yes, there will be banks that go under. Does that mean that we'll all be out of money? No, of course not. Anyone's savings are already guaranteed by FDIC. Not to mention that even in the case of bankruptcy, creditors (that would be people that bank borrowed money from, i.e. depositors) have first priority. Nobody is going to lose their savings.
But surely there will be other disasters, right? If so many go out of business, how will we get loans for houses, cars, or new businesses? Well perhaps not all of the banks will go out of business. Certainly there are those that have been buying up these insolvent banks. Or maybe other companies will take the opportunity to expand into the banking vacuum created by the insolvent banks. I'm not sure, but I'm not willing to let FUD from the government convince me to give the government the kind of virtually unlimited power that they are asking fo.
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A letter I wrote to my Congressman, Mike Honda: "I am writing to urge you, as my representative to vote against any kind of financial bailout. This is welfare for the rich and I am appalled to see that Democrats are supporting this. The financial crisis we face is not from too free of a market, it was caused by the Fed's loose monetary policy. When the Fed lowers interest rates below market, what can you expect but banks to turn around and try to lend out money as fast as possible? Their loans were being subsidized by the Fed. And now we are going to put even more economic power in the government, the same people who got us in this problem in the first place? Oh and we're going to saddle my children with debt for all of their lives to pay for it all. "
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