The sub-prime and overall mortgage carnage is now likely to lead to a financial crisis whose cleanup and bailout costs will make the S&L bailout bill look like spare change. We are only at the beginning of this fallout but, already, several proposals and bills in Congress have been submitted to help millions of sub-prime homeowners on the verge of bankruptcy and foreclosure.One thing is clear to me. The Republican ideology of free markets does not work in a modern society with a middle class. Yet, free-marketeers are already reviving their engines to blame the subprime problem on government regulation (go figure) while likely lining up to lobby Congress for bailout money for the lending institutions. I think this graf puts it best:
In summary, lack of sensible supervision and regulation of banks, mortgage lenders and other financial institution – partly induced by an ideology of free market fundamentalism – has been the core cause of this private sector created disaster, not excesses of regulation or of government policy. Thus, to minimize the fiscal costs of cleaning up this mess, use of public funds should be carefully managed and targeted to help the true victims of this mess – borrowers duped by predatory lending practices – while avoiding any bail-out of the culprits of this mess.When capitalism is left unfettered, it will ultimately sort out such problems. That's the allure of the argument of free-marketers. However, in that purely natural environment, the process of correcting imbalances is very ugly, disruptive and damaging to human beings. Government regulation of the excesses in a free market environment may have a somewhat stifling effect on those trying to make money, but it's done so for the greater good. I'm not a pure socialists, but I think FDR proved that a healthy balance between socialism and capitalism makes for a vibrant middle-class .... and a vibrant economy .... in the long run.
I'm a very lucky person with every allergy known to man but still happy to be enjoying a wonderful life living in the best place in the world!