HARM

The Unwinding of the Moral Hazard Trade

"Of course, as with any government action, the unintended consequence has been a complete lack of trust on the part of investors who have now seen that the government will leave them out in the cold if it suits their agenda."

The government SHOULD leave such "investors" out in the cold. In fact it should not be bailing out *anyone*, barring FDIC/NCUA-insured retail depositors.

Why should being rich and politically connected automatically guarantee a taxpayer bailout? Is that what you call "capitalism"? I must have missed class the day they taught socialism-for-the-rich = free-market capitalism.

Don't Blame Deregulation For This Crisis, It's All About Lack of Regulation

There is a *huge* difference between true "regulation" and "taxpayer corporate subsidies".

Examples of true business regulation that is actually *beneficial* to the average taxpayer and consumer:

Slavery outlawed
Child labor laws
Anti-racketeering laws
Anti-Trust laws
Anti-discrimination/in... laws
Anti-pollution laws
OSHA/worker safety laws
FDA food safety inspections

Examples of NON-regulation corporate handouts ("socialism for the rich") frequently mistaken for actual regulation:

TARP
Bear-Stearns/AIG bailouts
Nationalization of Phonie & Fraudie
Fed's 2% (soon to be 1% or 0%)
MID for non-owner-occupied flip houses, HELOCs and cash-out refis

Roubini Attacks Bailout, But Misses Boat on Regulation

Mish,

Like many people, you seem to be confusing old-school "regulation" (trust-busting, policing fraud, coercion and market manipulation, setting reasonable limits to business practices, "level playing field" stuff) with corporate socialism, which is NO REGULATION on the way up, but massive BAILOUTS (for the rich) on the way down, as Roubini and others have correctly pointed out.

The current business model in the U.S. is not so much "regulated capitalism", or even Soviet-style socialism, it's naked corporate socialism, mixed in with kleptocracy. Some have argued it's really closer to national socialism (a.k.a. fascism), and many of those arguments are compelling.

Examples of real "regulation": Trust-busting, outlawing fraud, coercion, insider trading, bribery, pump-and-dump. Preventing companies from dumping toxic waste in waterways (tradegy of the commons), prohibiting slave/child labor, requiring employers to carry worker's comp/injury insurance, whistleblower protection laws, requiring full documentation of borrowers, setting reserve requirements for banks, FDIC insurance for ordinary depositors.

Examples of corporate socialism and kleptocracy: Bailouts for the rich and well connected, losses for everyone else. Fed Funds rate set below the prevailing rate of inflation, cash-for-trash programs ("free" money for banksters). Extreme laisseze-faire approach to asset/credit bubbles on the way up, tacit --or even explicit-- approval of large-scale fraud, deliberate non-enforcement of existing regulations, no limits to margin trading, taxpayer underwriting of losses, generous tax credits/deductions for speculators, quasi-"private" entities (GSEs) that use their monopoly powers to squeeze out the truly private market players.

Let's not throw the baby out with the bath water just yet.

Miracle: Bush To Part The Bankrupt Sea

<i>What will get hurt? Nothing that we can think of.</i>

Riiight. Just savers, taxpayers and people who DIDN'T participate in this enormous Ponzi scheme of a housing bubble. Other than that, it's totally cool.

Here's a nice thought to ponder:

<i>“Democracy is an upside-down homeowner, a mortgage investor, and a tax-paying renter, voting on what’s for dinner.”</i>