The necessary evil of bailouts
It isn’t fair that responsible “folks who didn’t get caught up in the real estate frenzy of the 2000s” are on the hook for those who did, says Chris Farrell in BusinessWeek.com, not to mention the extremely well-compensated bank and mortgage executives who enabled them. But that doesn’t mean that the massive housing bill signed last week is a mistake. If the “Herculean actions” taken by Congress, the Federal Reserve, and the Treasury save us from “an economic plunge of frightening proportions,” then the bailout is fair for all of us. Innovation-driven capitalism entails busts as well as booms, and “like it or not,” limiting the downside of a bust is a critical part of monetary policy.
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