more anti-market madness

Chavez piping

It's true this is a mess. It's not a free market mess, much as people like Hugo Chavez would like the world to think. It's a government mess, with an invented and misconstrued market being created in part because of government intervention in the free market. In other words, the market invented itself and wasn't understood by either the regulatory agents or the players involved, and this can't be denied in the 'blame game'. But the government policies of extending credit and implied loan benefits for low-income, high credit risk buyers is not a free market policy. It's a government social engineering program that the free market mistakenly tried to profit off of. Because as currently designed, profits are very, very risky in such a market, not because 'greed' is bad. This was delicately stated with "Chavez may be overstating his case". Because it is apparent that free market principles do not actually apply to almost any nation, and more to the point, the American system that collapsed was more a government operation than it appears. The largest failures were the Mac banks which were an implied government banking system for mortgage securities. They were never a free market player as evidenced by the headquarters of these banks in DC (not NYC). The nationalization of such agencies is merely the next logical step when an agency is half in bed with government but doesn't seem to be spending the tax dollars it gets very intelligently.

AIG is a different story, and there is plenty of misapplication of funds and senseless decision making on the part of Wall St players to go around. The lasting point that "The lesson being that markets left entirely on their own don't always work in a country's best interests.", is a valuable idea to raise. But it's a point that Americans actually recognized early on in the 20th century. The basic idea of regulatory agents or anti-trust laws, etc is to remind the market players that they do need to behave and not abuse the markets they control. In the present case, it's apparent that some did. Others seem to have merely tried to compete in a market that they didn't create but was lucrative for reasons that nobody really understood. That is another lesson that should be taken away from all this (one that has been repeated ad nausem in the history of economic panics).