Liberty Maven

Vern McKinley, at Cato.org, suggests that all the so called “tools” in the recently passed bailout legislation have implications all liberty seeking free marketeers should be concerned about. He steps through some of the more talked about provisions in the rescue legislation and examines what their implications are in the real world.

…a primary source for depositor fears has been their effort to acquire a number of what they have called “tools” to address the crisis, including the power to make up to $700 billion of asset purchases. The tools that Paulson and Bernanke have sought have had one characteristic in common: a lack of confidence in markets to resolve the imbalances caused by government policy in the financial markets. In overpromising the soothing effects of one tool, Paulson and Bernanke have then moved on to securing the next tool.

McKinley looks at the implications of other tools such as raising the FDIC insurance limit, the allowance for the FDIC to borrow unlimited funds from the Treasury, and Treasury injecting capital into the banks. He concludes with what we’ve learned from the bailout fiasco.

The big lesson here is that making major legislative changes in times of crisis leads to bad policy (recent examples in the financial sector are the Patriot Act and Sarbanes-Oxley). These “tools” are a euphemism for extraordinary powers that would not be considered in a calm market. They are largely preemptive, and aimed at avoiding bank failures.

I couldn’t agree more. Vern McKinley lives in my district and ran against the incumbent big spending Congressman Frank Wolf in the GOP primary earlier this year. McKinley didn’t win, unfortunately. If he were representing me in Congress during the bailout debate I wouldn’t have had to send emails and make phone calls to him pleading to vote against it. I would have already known that his vote would be an emphatic “NO”, unlike my current so called representative.

Read McKinley’s wisdom in its entirety here at Cato.org.