The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.
See, here’s the thing. Republicans campaign on the evils of government regulation, then reap the benefits when the government has to step in to avert a complete meltdown. While touting the majesty of rugged individualism, the corporate wing of the GOP regularly counts on the Treasury to bail it out. There’s an economic term for this situation: moral hazard.
Regulation of markets is like porridge. It has to be just right. Too much is bad, but too little is bad and sometimes far worse. You don’t need a degree in economics to understand the basic cycles of panic and depression over the course of American history. When charlatans, monopolists, criminals and greedheads take over the system, the results are utterly predictable.
How many times in our lives do we have to bail out the financial industry? The Savings and Loans scandal apparently taught us nothing.
Personal responsibility is apparently for chumps, the little people and those worth less than $5 million.