WILL CHAPMAN
PUBLISHER

What’s caused the big financial crisis for our nation’s economy?

Certainly I won’t suggest I understand all of the factors and nuances that have caused the federal government to take over the nation’s two biggest mortgage companies, Fannie Mae and Freddie Mac, and to now consider spending $700 billion to buy up bad mortgage loans to help other firms improve their books, and get back on a firm financial setting.

Advertisement

Although the various experts don’t all agree on the form of a bailout, it does appear most experts agree that some sort of bailout is needed.

Predictably, there are those trying to take political advantage of the Bush administration’s efforts to address the crisis.

“Why does the government bail out these big companies, the big shots and political cronies?” they say. “What about poor working class families who lose their homes when they can’t meet their obligations? Why no bailout for them?”

Clearly in a true free market economy, winners win and losers are allowed to lose.

While no one wants to see someone lose his home or face any other financial loss, those individual losses like losses suffered by the typical business, aren’t going to cause the widespread financial problems for the whole economy that are threatened should we allow Fannie Mae, Freddie Mac or some of these huge insurance or investment companies to collapse.

Those who seek to paint the government’s efforts to prop up the economy as cronyism or fat-cat favoritism would presumably be the first to say the federal government must do something to save regular working people who saw their 401-K or other personal savings lose their value.

Patching up the big cracks in the dam, before they can spread or get even bigger, is the best way to keep the dam from collapsing and seeing us all get swept away in a flood of financial collapses.

Just proposing the bail out seems to have slowed down the negative financial announcements that were coming so fast in the days before the proposal was made.

Odds are whatever the final form of the bailout, it won’t be perfect.

But an imperfect plan that prevents an economic collapse is better than no plan that allows us to fall into an economic depression.

Of course, just as important as the plan to patch things up for now is to figure out what caused the current problems, and take steps to prevent this situation from happening again.