Foggy Crystal Ball by Jonah Goldberg on National Review Online
These are humbling times for champions of the free market and American-style capitalism.
Really? Why?
Ask yourself this: Why are we in this financial crisis?
Any short list of reasons would include a lack of transparency in markets and regulatory rule-making; collusion between business and government; the politicization of lending practices (including the socialization of risk and the privatization of profit through giant governmental entities like Fannie Mae);
Then ask yourself: Does this sound like a free market? Really?
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No, but that crap is “American-style capitalism”. Unfortunately.
“Government entities” do not “privatize” profits. “Profits” from government entities tend to become part of the general budget.
There has seldom if ever been a “free market place” in the USA. Governments from local to the Feds have always had restrictions that prevented a true free market. Back in the days of the robber barons the laws were in favor of business and then the laws were changed to favor labor…seldom has the playing field been level nor has the Law of supply and demand been allowed to work efficiently.
The law of supply and demand is a cruel law…it causes temporary feasts and famines at its best but when it is trifled with by governments it does its worst..as we are now seeing.
The GSEs like Fannie and Freddie were privately owned equities and when times were good and profits were up, their shares went up in price, allowing private s/h to profit.
Granted the s/h have taken quite a hit lately on their shares, but in a private market FNM and FRE s/h should be holding worthless paper. Any value they have now is purely socialized risk.
Ditto, and a whole lot more, for private bondholders of those same GSE’s. Although not worth 0, without the govt stepping in it is not likely that bondholders would be getting par + interest back on those bonds.