Reckless Bailouts

James K. Glassman | September 29, 1998

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The firms bid too high in a 1996 FCC auction. At the very least, it seems, they should lose the $1.3 billion they put up in down payments. But, instead, the House Commerce Committee on Thursday unanimously approved a deal that lets them renege on their bid obligations and get full refunds on what they've already paid the government.

Not only is this bailout grossly unfair, it will also encourage reckless behavior in future auctions. And, speaking of reckless behavior: There's a parallel to be drawn between moral hazard in the LTC, wireless and IMF cases and moral hazard in the current scandal involving President Clinton.

Americans worry, for instance, that impeaching and convicting Clinton could hurt the economy and our world standing. This is a legitimate concern -- but I'm more afraid of moral hazard. If we let powerful people get away with doing bad things, they will not only do them again and again, but encourage others to follow their example.