The Economy is Falling!

St. Paul, Minn. — Rep. Michele Bachmann has been showing up frequently on national TV to criticize the $700 billion proposal to address the nation’s financial crisis. She’s appeared on Bloomberg, CNBC, CNN and Fox News.

Bachmann’s criticism, which she shares with many conservative Republicans, runs counter to the Bush administration. Bachmann says she’s still trying to get information about the proposed bailout, but at this point she’s not on board.

“We’re looking at the American public, the American taxpayer, bailing out private businesses. That is not the way we do business in the United States of America.” said Bachmann. “We need to engage the free market and capitalism. This financial failure was not the fault of free markets or of capitalism. Rather, it was the fault of too much government intervention.”

From MPR

Ah, Michelle Bachmann. Republican representative from Minnesota’s 6th District, Queen of the Lightbulbs. Too much government intervention is the problem? Yeah right. Not that I actually agree with the bailouts. Though in the case of Fannie Mae and Freddie Mac the term “Too Big to Fail” is more than true. But this term is getting thrown around a lot as of late. What’s the deal here? How does something become too big to fail?

So it made for a strange spectacle last weekend as the current Bush administration, which does cast itself in the Reagan mold, hastily prepared a bailout package to offer the government-sponsored mortgage companies, Fannie Mae and Freddie Mac. The reasoning behind this rescue effort — like the reasoning behind the government-induced takeover of Bear Stearns by J. P. Morgan Chase just a month before — sounded no different from that offered in defense of many a bailout in Japan and Europe:

The mortgage giants were too big to be allowed to fail.

Big indeed. Together, Fannie and Freddie own or guarantee nearly half of the nation’s $12 trillion worth of home mortgages. If they collapse, so may the whole system of finance for American housing, threatening a most unfortunate string of events: First, an already plummeting real estate market might crater. Then the banks that have sunk capital into American homes would slip deeper into trouble. And the virus might spread globally.

From The Nation

Ah, I see. So, essentially the failing of businesses, banks, lending corporations, etc. which have their fingers tangled up in the markets of the country, and therefore the rest of the world, would cause a horrible cascade of problems in the economy, perhaps like that of the Great Depression. But then, we all knew that. Unless you’ve been under a rock for the last six months, that is, apparently like Michelle Bachmann has.

What isn’t fair, however, is that these companies were allowed to grow to the size that they are where they pose a threat if they fail. It seems that being lax on antitrust laws led to this forced bailout. The two government-backed but independent financial institutions should have been broken up long ago. I mean, the government even tried to break up Microsoft, and how little do they have to do with something as massively important as the economy? In essence, these companies, and others, who knew they were “too big to fail” had the freedom to do as they liked, knowing that if they made a wrong move and hit financial hardship they would be safe under the watchful eye of Uncle Sam.

But the government, whose responsibility is to its people and not its companies, banks, CEOs, etc. allows average folks to go into bankruptcy, lose their homes through foreclosure, lose their jobs, fall into horrible debt. And we continue to talk about how “big government” or more regulation is bad? How can anyone believe that. It seems to that lack of government regulation and the laissez-faire attitude have led to the problems we find ourselves in. Theodore Roosevelt, a Republican whom politicians like John McCain often quote, was in fact an avid trust-buster and for more government regulation in business. He said in 1901 State of the Union message to congress:

It is no limitation upon property rights or freedom of contract to require that when men receive from government the privilege of doing business under corporate form … they shall do so under absolutely truthful representations … Great corporations exist only because they were created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions.

The way I see it is this: if we vote in a president who believes in minimum government regulation and allowing things to play out the way they are right now, we are mere months away from a complete economic depression. If the market were to crash, there are enough people out there who do not trust in FDIC and will remove their money from the banking institutions they utilize. With no money to trade, we will find ourselves in the next Great Depression. And the war in Iraq, or one in Iran, will not pull us out of it. We have to think carefully, or we will be in a lot of trouble.