Thursday, July 17, 2008

Uncle Sam Adopts Fannie and Freddie -

Uncle Sam Adopts Fannie and Freddie - "Even so, the descent down the slippery slope of socialization of the financial system is gathering speed.

'Capitalism without failure is like religion without sin,' Allan Meltzer, the distinguished economic theorist and historian once wrote.

Yet, like it or not, we don't want to deal with such harsh verities, either in religion or the marketplace. Traditional churches are losing out to TV evangelists who promise material rewards now rather than later.

For the markets, pushing the limits with ever greater risk brings enormous rewards -- until the bust comes. Nobody has to give back bull-market bonuses when the bear arrives, so why worry about the downside?

It's too late to worry about high-minded concepts of moral hazard. The price of these bailouts will be borne by the taxpayers. And the financial markets will be subject to greater supervision and regulation, reversing the tide toward deregulation.

Ideologues of the right and the left can argue whether this is a good thing. Investors should just deal with it."


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