A Suggested Response to the Economic "Crisis"

This week (and month) we all saw our federal government step in and promise to bail out a number of large financial corporations whose demises, quite frankly, are the result of poor judgment and age-old budgetary foolishness. They took risks most prudent individuals would deem unnecessary, and the consequences of these risks have become apparent.

We are now being told that the government (i.e., us) is going to pump, at the very least, hundreds of billions of our dollars into these companies to keep the economy from collapsing. And on top of that, additional governmental oversight/agencies/etc. will be put in place to keep this sort of thing (they say) from ever happening again.

Let us review several core principles at work here.

1. It was poor business practices which account for most of the economic problems these companies face today. Wise companies will not expose themselves to excessive risks...especially if they are large companies.
   
2. Companies who risk their investors' money may go belly up. This is part of the natural course of business. Investors must realize this. Good investors will make appropriate decisions after assessing the risk involved; good investors will not take excessive risks.
3. Many individual Americans have taken on too much debt relative to their ability to repay it in a timely manner; many businesses have unwisely allowed them to do this.
4. Lending substantial sums of money to those not well suited to repay it is foolish.
5. Many corporate titans took risks with others' money, with the realization that the government would probably cover their backs after they made millions.
   
6. The current government "watchdog" agencies, rules, etc. were inadequate, insufficient, or inept to deal with this at an earlier time.
7. Increased government involvement in the future will not make things better in the future.

Many will observe that a lot of unethical, unwise, greedy, and indeed criminal things have occurred with these companies. Many will also observe that laxness, ineptitude, and "coziness with lobbyists" describe much of what occurred on the government-oversight side.

But we must also observe that a quasi-socialist state is not what America needs, nor is it anywhere near her best interests. The lessons of history must be learned, not ignored. The government's role needs to be a lot simpler and a lot more hands-off. It can be summarized as follows:

1. Companies must be responsible for their decisions; therefore, in fairness to the investors (i.e., owners), transparency and honesty must be present in their business dealings.
   
2. The laws must be written in such a way that dishonest practices are not allowed, honest and transparent practices are allowed, and risks must be divulged to investors (i.e., owners), allowing the investors (i.e., owners) to decide if they wish to participate. Predatory business practices and practices by outsiders (i.e., non-owners) that diminish the gain or increase the loss of investors (i.e., owners) should be against the law.
   
3. Behavior in violation of the laws must be punished. Strongly.
   
4. Investors who took risks must be allowed to reap the rewards/consequences of such decisions. Government should not interfere in this, nor should it "bail them out."
   

Going forward, a few suggestions for the government, John McCain, and Barack Obama:

1. Divest yourselves of Fannie, Freddie, et al. Break them up into little pieces and sell them off, to the highest-bidding investors who are willing to buy them. Return them to the private sector, minimizing the impact on the federal budget. [Side note: While you still possess them, cut their leaders' salaries to something less than what you make. And better yet, replace them with competent folks.]
   
2. Return to the practices outlined above. Deregulate where deregulation violates those practices. Regulate only where it is necessary to follow those principles. Keep your hands off when they should be kept off. Allow investors to risk, but don't reward or punish it.
3. Never, ever get our government into this position again.