Monday, July 14, 2008

American Government - Provider to All

With the weekend announcement that the US Government is going to bail out Fannie Mae and Freddie Mac, the United States took a huge leap towards a full-blown socialist society. For two centuries this country stood on the belief of free enterprise with a government that only stepped in to assist in the most dire of situations. Now the government has become the prime lender for millions of Americans who are relying on the government to pay their home loans and prop up the banks that made them.

The question is whether we can ever get back to where we were? The government used to make loans available at decent rates and expected the money to be repaid. Now it makes sure loans are available to middle class Americans for housing and education and supports the banks that make risky or bad loans. And this all falls on the backs of the American taxpayers.

For those that have missed it, the federal government is not only buying out the housing market fiasco but President Bush agreed in May to buy federally guaranteed student loans so banks would have more capital to continue lending. Why did the Bush Administration agree to puchase the loans? Because banks that made the loans were having problems selling the investments linked to those loans and, therefore, would be unable to make the next set of loans.

I'm not saying the government should stand by and watch the economy collapse but expanding government to prop up failing entities is not a solution that I like to see. For generations, the US has preached to the world the word of Capitalism. In Japan, Americans called for an end to their willingness to save failing banks and let the companies fail. Now when faced with the same problems, the American government won't allow these companies to fail.

Perhaps Fannie and Freddie are to big to allow to collapse. Perhaps if they fall, so does the American economy. But this is a mess that has been created by too much government meddling in hopes to increase home ownership and educational opportunities. Those opportunities can exist without government intervention but it wouldn't have been as easy. Well, let me ask now, how easy was it really?

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