Irresponsible Risk

"No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk." Timothy Geithner

So, now the government thinks it should decide how much risk banks and other businesses take? As the banks retrench and take less risk, Geithner is trying to get them to take MORE risk! -- "While this crisis was caused by banks taking too much risk, the danger now is that they will take too little." Geithner.

Ah yes. Because Geithner is now a government employee he knows just how much risk banks should take. And we call this a free market system???

Is Geithner asking the taxpayer to take less risk? No! He is asking the taxpayer to finance toxic assets the banks cannot sell. How irresponsible is that? The taxpayer does not have any choice. The shareholders of the original bank risks did have a choice. They could choose not to own stocks and bonds of the banks. The taxpayer must submit because the government only operates by using force. The government will force the taxpayer to take unnecessary risks. That's why I keep calling the government a mob.

But here is the hidden agenda, more government control. "But as we fight the current crisis, we must also start the process of ensuring a crisis like this never happens again. As President Obama has said, we can no longer sustain 21st century markets with 20th century regulations. Our nation deserves better choices than, on one hand, accepting the catastrophic damage caused by a failure like Lehman Brothers, or on the other hand being forced to pour billions of taxpayer dollars into an institution like AIG to protect the economy against that scale of damage. The lack of an appropriate and modern regulatory regime and resolution authority helped cause this crisis, and it will continue to constrain our capacity to address future crises until we put in place fundamental reforms." Geithner

In a previous post titled "The economy will blossom" I wrote, "House prices are falling as rents increase. The renters will find house bargains that are too good to resist and will start buying houses."

To confirm my prediction Bloomberg reports--"U.S. Sales of previously owned homes unexpectedly climbed in February as record foreclosures brought bargain hunters into the market to take advantage of lower prices. Purchases increased 5.1 percent to an annual rate of 4.72 million from 4.49million in January, the National Association of Realtors said today in Washington. The median price slumped 15.5 percent from a year ago, the
second-biggest drop on record, and distressed properties accounted for 45 percent of all sales."

None of the trillions of dollars of government meddling is necessary. The free market will work. Now if we could just see one in operation, somewhere, anywhere.

"Start with the idea that you can't repeal the laws of economics. Even if they are inconvenient." Larry Summers


Charles Tolleson