Putting the "Loss" Back in "Profit and Loss"
George Mason University professor and economics romantic Russell Roberts is not so happy about the Fed bailing out Bear Stearns:
Yes, letting Bear Stearns go under would have been dangerous. But helping JP Morgan devour Bear Stearns is dangerous, too. Where does the government stop in protecting people from irresponsibility? Home owners and lenders are next. The political pressure is inexorable for some sort of bail out. And then comes more regulation of investment banks.
In a world where people who make bad decisions are spared the full consequences, only one thing is certain. We've encouraged more people to make more bad decisions in the future. The real price to be paid isn't the dollar costs of any bail out but the encouragement of recklessness and irresponsibility. That will make all of us poorer down the road.
Logical to the point of obviousness, sure, but it's the kind of the thing that bears repeating in the coming months. Whole thing here.
