South Carolina Governor Mark Sanford: A Bailout for All Our Bad Decisions?

Posted by Kendall Harmon

I am worried for our country -- not so much because of the tumult in the financial markets but because of the federal government's response and its implications.

It seems that each new crisis is met with a new answer from the government. After Hurricane Katrina, the federal government assumed roles traditionally handled by state and local governments. After the Sept. 11, 2001, attacks, the government federalized 25,000 workers through the Transportation Security Administration. The example of security-focused countries such as Israel, which elects to have that function handled by the private sector, did not matter. Now, our federal government is likely to commit three-quarters of a trillion dollars -- more than last year's Pentagon budget -- to a bailout based on what happened in the credit markets last week.

An ever-expanding scope of federal commitment and power is not what made this country great. Expanded power in one place comes at a cost in other places. American cornerstones such as individual initiative and an entrepreneurial spirit -- born in free and open societies with private property rights and the rule of law -- have never fit particularly well within the context of an ever-growing federal government.

Read it all.

Filed under: * Economics, PoliticsEconomyThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General* South Carolina

18 Comments
Posted September 26, 2008 at 9:09 am [Printer Friendly] [Print w/ comments]



1. Katherine wrote:

Amen, Governor.

September 26, 9:31 am | [comment link]
2. Nick Knisely wrote:

This movement in secular society seems to be mirrored in the Episcopal Church’s and the Anglican Communion’s governance of late as well. It’s the latter that has me particularly worried.

I’ve been wondering what’s at the root of the pressure to move toward centralism (as opposed to centrism). I’ve not been able to noodle it out. But it’s rather striking that it’s happening in such disparate theaters.

September 26, 9:40 am | [comment link]
3. Chris wrote:

from US News & World Report:

Economist Brian Wesbury sums up the fears of many economic conservatives: “When the public hears the government must save the economy from capitalism run amok it loses faith in our free market system.”

I think the plan will fail, or at least the plan that does pass will be radically different than what Paulson had in mind.  The congressional Republicans are not going to hand the Democrats and the Presidential Administration $700 billion - there is too much room for mischief.

September 26, 10:06 am | [comment link]
4. Jeffersonian wrote:

Amen, Governor

Precisely my thought.  It should be noted that this bailout has found all sorts of piggies pushing their snouts into the trough with hardly a mention: student loan advocates, auto companies, etc.

We should remember that what made the Great Depression great was not the 1929 collapse on Wall Street, but the federal government’s overbearing response to it.  We are in danger of repeating that today.

September 26, 10:44 am | [comment link]
5. Sarah1 wrote:

Right on.

Mark Sanford for President.

September 26, 11:06 am | [comment link]
6. Jeffersonian wrote:

I’ve got an idea:  I’ll bail out these guys who bought all these mortgage-backed securities.  I’ll give them $20 for the lot, take it or leave it.

No takers?  Why not?

September 26, 11:15 am | [comment link]
7. Passing By wrote:

I’ll say here what I said over at SF—I really like it when someone with actual clout says in public everything I’ve been saying to my spouse. 

Why go to all the trouble Fannie and Freddie did speculating on the high-risk mortgages?  They could have just driven 3 hours north on 95 to Delaware Park and played the horses on a regular basis…

September 26, 12:20 pm | [comment link]
8. St. Jimbob of the Apokalypse wrote:

Why go to all the trouble Fannie and Freddie did speculating on the high-risk mortgages?  They could have just driven 3 hours north on 95 to Delaware Park and played the horses on a regular basis…

Because the horses didn’t have politicians pushing that kind of investment on FM/FM.  Maybe that’s because horses don’t don’t make big campaign contributions.

September 26, 12:29 pm | [comment link]
9. Irenaeus wrote:

Mark Sanford makes excellent points, particularly about the incentives created by government bailouts, the difficulty of curtailing government programs, and the need to allow mismanaged firms to fail.

The administration’s mega-bailout proposal raises two mega-questions.

First, are we really (as Paulson and Bernanke told us ten days ago) on the verge of a global financial panic?

Second, what are the long-term consequences of adopting the proposal? To what extent will it impair market discipline on investors and financial institutions—-and thereby encourage unsound risk-taking? To what extent will it encourage complacency by financial regulators? To what extent will it force the hand of future Congresses and presidents?

September 26, 12:32 pm | [comment link]
10. Passing By wrote:

JimBob, you know I can’t argue with you one iota.

September 26, 12:39 pm | [comment link]
11. Irenaeus wrote:

Jimbob [#8]: Fannie and Freddie liked to talk about how they beneficently made housing affordable and stabilized housing finance. The fact is the Fannie and Freddie consistently acted to maximize their profits.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1022989
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=658263
Fannie and Freddie moved into subprime lending because they wanted to. They’d had extraordinary earnings growth during the 1990s and wanted it to continue. But they had already taken over most of the traditional market in which they were allowed to operate. They built up their subprime business as part of their strategy to maintain earnings growth. Like many lenders and investors, they believed the subprime market offered attractive returns. No one made them do it; they wanted to do it.

September 26, 12:58 pm | [comment link]
12. Baruch wrote:

Nannyism should be confined to infants, when adults do stupid things they should suffer the consequences. If they are saved by nanny they will continue to do stupid things, as they have no fear of loss. Political nannys are the worst kind as they do not use their own money to bail out these stupid adults, rather its added to an already outlandish pile of debts for future taxpayers.

September 26, 3:49 pm | [comment link]
13. Chris wrote:

yep #11, and Jim Johnson, Franklin Raines and Jamie Gorelick, all prominent Democrats, walked off with tens of millions of dollars from FM/FM and we, the tax payers, are left holding the bag due to their incompetence.  For all the wailing the Democrats do about executive compensation (and I agree with much of that), they are a bit silent on the matter of the aforementioned…...

September 26, 3:54 pm | [comment link]
14. A. McIntosh wrote:

I wonder if the government would enact a law, or a Constitutional
Amendment, to ban any more bailouts. I know I am dreaming, but
it is fun.

September 26, 5:40 pm | [comment link]
15. Bob Lee wrote:

The public is not buying it because they don’t understand it. They don’t understand it because it was not explained to them by their congressman in a way they could understand it—-because the congressmen do not understand it.
-It is not a bailout
-If we don’t do it, your local bank is going to have trouble
-Then you will have trouble.
The public does not buy it because they have no idea of the depth of the problem.

bl

September 26, 5:51 pm | [comment link]
16. Stefano wrote:

OK, ‘Bob Lee’, here’s your chance to do some ‘splainin’.  And remember, electrons are cheap.

September 26, 6:25 pm | [comment link]
17. Irenaeus wrote:

“yep #11, and Jim Johnson, Franklin Raines and Jamie Gorelick, all prominent Democrats, walked off with tens of millions of dollars from FM/FM and we, the tax payers, are left holding the bag due to their incompetence”—- [#13]

Yep, #13, just the sort of insubstantial flippancy I’ve learned to expect.

As for political connections and politicized hiring, take a good look at . . .
—- The role of Utah Republicans, known to their detractors as the “Mormon Mafia,” in running Freddie Mac. Leland Brendsel, Freddie’s longtime (and now disgraced) CEO, was the most recent and prominent exemplar.

—- The role of Senators Jake Garn (R-Utah) and Alfonse D’Amato (R-N.Y.) in transforming Freddie Mac from a cautious guarantor into a high-rolling portfolio investor.

—- The role of Senator Robert Bennett (R-Utah) in blocking the administration’s Fannie-Freddie reform proposals.

—- Fannie’s hiring of Robert Zoellick, a political operative in the first Bush Administration and now this administration’s U.S. Trade Representative.

—- Fannie’s hiring of Arne Christensen, Newt Gingrich’s top aide.

—- Fannie’s hiring of James C. Miller, Director of the Office of Management and Budget during the Reagan Administration.

—- Freddie Mac’s hiring of Newt Gingrich.

—- The consulting fees Senator McCain’s campaign manager received from Freddie until Freddie went broke. It’s not clear what the campaign manager ever did to earn those fees.

To name only a few examples.

As I’ve written previously, Fannie and Freddie bestowed their political favors promiscuously.
_ _ _ _ _ _ _

In any event, your silly swipe in #13 is irrelevant to whether the government coerced Fannie and Freddie into making bad investments—-the issue I discussed in #11.

September 29, 5:27 pm | [comment link]
18. Chris wrote:

Iraneus, I think you are in denial.  Certainly some Republicans profited from this chicanery, but your Dem pals Frank, Dodd, Waters, etc. in Congress strenously fought efforts by REPUBLICANS, both congressional and the President, to reign in FM/FM.  It is not a “silly swipe”, the you tube videos do not lie:
http://www.pajamasmedia.com/instapundit/archives2/025053.php
nor are the facts here in dispute:
http://www.ibdeditorials.com/IBDArticles.aspx?id=306978378974502

I’d recommend you just deal with this as (presumably) Christian person instead of this reflexive “blame Republicans for everything” tripe that you have littered throughout this site.

September 30, 12:09 pm | [comment link]
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