Link: http://www.cato.org/pub_display.php?pub_id=11612

As Congress starts to move on financial reform, Richard Rahn brings out this article arguing against the “Too Big to Fail” stupidity that gave us $700 billion in TARP debt and a financial crisis that decimated peoples’ life savings. The following paragraph reiterates the kind of argument that Rahn and others have been pounding ever since the crisis began:

When government becomes a player and tries to prevent the failure of market participants, its decisions are almost invariably corrupted by the political process. Government overseers tend to be less attentive and careful because they are playing with taxpayers’ money rather than their own. Fannie Mae and Freddie Mac are the poster children for what is wrong with “state capitalism” or “economic fascism,” in which the government leaves nominal ownership in the hands of private individuals but exercises control by regulation and taxation. Despite warnings from knowledgeable critics, Fannie and Freddie engaged in unsound financial practices for years, often at the behest of their political masters in Congress. Rather than being allowed to go into bankruptcy, broken up, truly privatized and reorganized, they were bailed out by Congress. As a result, bad practices continue, and the taxpayers will once again be stuck with hundreds of billions of dollars in additional liabilities.