Our View: Feds right to back off bailouts - East Valley Tribune: Opinion

Our View: Feds right to back off bailouts

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Posted: Thursday, September 18, 2008 9:32 pm | Updated: 11:24 pm, Fri Oct 7, 2011.

Treasury secretary Henry Paulson made it clear to Wall Street leaders after the market closed Friday that there would be no more bailouts. After engineering the fire sale of Bear Stearns and seizing Fannie Mae and Freddie Mac, Paulson said he would put no more taxpayer money at risk.

Over the weekend, Lehman Brothers decided to file for bankruptcy and may have to liquidate, Merrill Lynch agreed to be bought out by Bank of America and insurance giant AIG was in a search for cash.

Paulson seemed adamant: Wall Street would have to start finding ways of saving itself. The street wasn't left totally on its own. The Federal Reserve will continue to make short-term emergency loans under generous terms to solvent investment banks suffering temporary liquidity problems and this week it broadened the type of securities it would accept as loan collateral.

Then, on Tuesday, the U.S. government propped up AIG with a $85 billion emergency loan. So much for, "You're on your own ..."

Rep. Jeff Flake, R-Ariz., said, "Federal bailouts may stave off short-term economic damage, but the long-term economic outlook will be much worse if the market is not allowed to make its own adjustments."

We agree that it's not the government's job to pick winners and losers in the market - even though we may see a lot more losers before this is over.

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