BrianGarst.com

Obama steps up campaign for financial overhaul, putting pressure on GOP:

Just before a meeting with Democrats and Republicans to discuss the legislation, President Barack Obama said it needs to be passed in order to prevent another financial “meltdown.”

He warned that not passing the bill could put the economy in peril.

“All of us recognize that we cannot have a circumstance in which a meltdown in the financial sector once again puts the entire economy in peril,” Obama said. “And that if there’s one lesson that we’ve learned it’s that an unfettered market where people are taking huge risks and expecting taxpayers to bail them out when things to sour is simply not acceptable.’’

First of all, Obama contradicted himself.  A “market where people are taking huge risks and expecting taxpayers to bail them out when things turn sour” is not unfettered.  Nevermind that the one we have is obviously not unfettered, but even his simplistic description of it makes that a logical impossibility.  Implied and explicit guarantees by government are a market distortion.  Government interference already exists under such circumstances.

If we remove the President’s gratuitous use of “unfettered” here, then he’s actually saying something semi-intelligent.  We clearly do not want a system where government is encouraging people to take greater risk than they otherwise would by guaranteeing their loses with taxpayer dollars.  But that’s exactly what government did, and is one of the primary causes of the financial crisis.  The correct response to this situation is not to say that “we need to stop people from taking risks!”  The correct response is to end all government bailouts and make clear that there is no such guarantee.

Barack Obama financial crisis