Monday, June 8, 2009

The Morphine Drip

Two former Wall Streeters wrote a long, skeptical article about the economic policies of the administration in the Sunday New York Times. Here's a sample:

Why is the morphine drip still in the veins of the financial system? These
trillions in profligate federal spending are intended to make us feel better
again even though feeling pain, and dealing with it responsibly, would be
healthier in the long run. It is time to stop rescuing the banks that got us
into this mess. If that means more bank failures on a grander scale or the
dismemberment of Citigroup, so be it. Depositors will be protected — up to
$250,000 per account — but shareholders, creditors and, sadly, many employees
will, for the long-term health of the system, need to feel the market’s

Is there to be any limit on bailouts? We have now thrown money at
the big banks, any number of regional ones, insurance companies, General Motors,
Chrysler and state and local governments. Will we soon be bailing out Dartmouth,
which just lost its AAA bond rating? Is there no room left for what the Austrian
economist Joseph Schumpeter termed “creative destruction”? And what is the plan
to get the American people out of all these equity stakes we now own and don’t
want? Furthermore, for government leaders to decide who shall live and who
shall die in an economic sense opens them up to legitimate charges of crony
capitalism and favoritism. We will benefit in the long run from a return to
market discipline.

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