The Bailout's Essential Brazenness by Jay Cochran

Dr. Cochran is an Adjunct Professor of Economics at George Mason University.

Added to cato.org on October 1, 2008

This article appeared on Cato.org on October 1, 2008

One of the more galling arguments put forth in support of the Treasury’s $700 billion bailout, is the suggestion that the government might actually profit from being a hold-tomaturity investor in the illiquid mortgage instruments currently clogging the arteries of high finance. Laying aside the thorny issue of whether the Treasury Secretary and his overseers have the means to discover the correct price for securities that the market itself cannot price (hence the illiquidity), it is breathtakingly brazen that the supporters of this scheme think it somehow proper for the government to earn even one basis point of net return from a problem that is of its own making.

Congress and the executive branch, established the rules and institutions that all but guaranteed the outcome we taxpayers see unfolding and are being asked to pay for today. Government leaders had multiple opportunities to correct problems identified years before, but instead dithered and calculated. To suggest now-in malice, greed, or fear-that it is somehow proper for government to make a net return on the assets it purchases, is as unjust as allowing a referee to make money gambling on the outcome of a game he oversees. (Read on)