By all rights, we should soon expect to see this hanging from an office tower in Manhattan, with letters 30 feet high:
But we won't. It wasn't Joe Six-Pack who asked for this initially; it was the Financial/Governmental Complex. The American people just followed their cues, and fell in line when instructed.
Despite ample evidence to the contrary, including the very instructive example of what Japan did in the 90s, Wall Street, the mainstream media, and the general public have urged Congress to pass the bailout. "Something must be better than nothing!" they say, frantically.
But when that something is precisely the wrong thing -- when the doctor gives more poison as the cure for poisoning -- the prospects for a full and speedy recovery fall further and further away. As Jonathan Hoenig said in an excellent article at SmartMoney.com [HT: HBL]:
This range of the moment, do something! thinking is exactly what we do not need. I predicted earlier this week that the House would take up the bill again, slash it in half, and pass it as a temporary measure, content in the knowledge that they can always increase it later. But I was wrong. They went for the whole thing.
...what has caused the market's volatility isn’t the lack of government action, but fear of it. After all, it's the short-sided, pragmatic rush to pass a bill -- any bill -- that spawned Sarbanes-Oxley and the Patriot Act. And while there's no way of precisely knowing the economic fallout of not passing the bill, the unintended consequences of such a draconian scheme are equally unimaginable. Every move the government makes, from banning short-sales to offering to insure money-market mutual funds, affects trillions of dollars of private capital in unfathomable ways. ...
It's not the proper role of government to prop up stocks, housing or any other market. Yet like the vaudeville performer on the old Ed Sullivan show, politicians now see their duty as to keep the plates spinning just a few more months, maintaining constituents in their homes and jobs at least until after the elections, without any thought to the long-term cost being paid to do so. (bold added)
Hoenig ends his article on a justifiably ominous note:
This bill lays the groundwork for the central planners of the next administration to go further, when this new power-grab inevitably fails. Saying it didn't go far enough towards reining in the free market cowboys, they'll be able to establish a new 4-Year Plan, and another, and another.
Who deserves a bailout? Nobody. Not white-shoe investment bankers in Mercedes SLKs nor unwed pregnant teenagers missing payments on their subprime loans. Most Americans understand this.
What Americans don't get, however, is that the goal of the bill isn’t to help Wall Street or Main Street, but to centralize power in Washington. Not surprisingly, that's where its biggest proponents just happen to reside.
Americans may not have realized what they were asking for when they dropped their opposition to the bailout. I fear they will find out soon enough.