Senate conservatives last week waged a hard-fought and principled battle to protect both U.S. taxpayers and the integrity of the free market against the Washington establishment that favored a government bailout of General Motors and Chrysler. By late Thursday it appeared they had won. But within hours of the end of negotiations in the Senate, the White House undercut conservatives by announcing it would consider using taxpayer money from the Troubled Assets Relief Program (TARP) to bailout the Detroit automakers. Sadly, this wasn’t the first time the White House felt …
Before he became Treasury secretary, Hank Paulson firmly believed the government had no business interfering in financial markets by banning the short selling of financial stocks. But by mid-September of this year, while Lehman Brothers was on the verge of collapse, Paulson pressured the Securities and Exchange Commission to ban short selling. In today’s Washington Post, Paulson remembers saying at the time, “Whatever we are doing right now isn’t working, so go ahead and do it.” Unfortunately, Paulson’s abandonment of principles did not end there. By the end of September, …
The Corner‘s Iain Murray flags a valuable new study out of the University of Chicago on Treasury Secretary Hank Paulson’s bank recapitalization plan: We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial system. We estimate that the revised Paulson plan increased the value of banks’ financial claims by $109 billion at a taxpayers’ cost of $112 -135 billions, creating no value in the banking sector. We compare the cost of Paulson’s plan with the costs of alternative solutions that would have achieved the …
Yesterday before the Joint Economic Committee, Federal Reserve Chairman Ben Bernanke made a clear case as to why federal action is needed: home mortgages and car loans had become harder to get, commercial credit was becoming scarce for many businesses and consumer spending had already declined. Leaders in both parties know that inaction will hit Main Street hard. According to The Washington Post, public utility companies will have to raise rates to cover the increased costs of short-term borrowing, two-thirds of National Small Business Association members report feeling pressure from …
There is no doubt that past government intervention in the market, particularly by Fannie Mae and Freddie Mac, is largely to blame for the current financial turmoil. And while past government intervention cannot be used to justify further government interference, we also have to ask how much unnecessary pain the economy must bear. Absent action along the lines proposed by Treasury Secretary Hank Paulson, capital markets at home and worldwide would eventually normalize. But how many large and small companies are going to have to fail to make payroll because …
As a general principle, conservatives believe government should not intervene to protect those who have made poor business decisions — even if those decisions have been influenced by excessive government regulation. But there can be rare situations where the cumulative effect of many bad decisions in one sector of the economy can threaten everyone. In these rare cases, government has a critical role in keeping the market’s infrastructure functional. We are in such a situation today. Treasury Secretary Henry Paulson has presented Congress with an outline of an expensive and …
