Writes Alex Epstein on the $700 Billion Bailout at FoxNews:

This socialistic power grab, just like the last half dozen, is being sold as a necessary, one-time “emergency” measure.  But these measures are simply greater and greater doses of the poison that got us where we are in the first place: government manipulation of the housing and financial markets.

Government manipulator number one was the Federal Reserve, which dictated artificially low interest rates, inflating the currency to create the illusion of economic growth. The result was a borrowing spree by banks, which proceeded to lend nonexistent capital to homebuyers, who proceeded to collectively fuel a housing boom–which fueled a boom in mortgage-backed securities. Fannie and Freddie added dramatically to the number of bad loans and bad securities on the market under the banner of “affordable housing,” using their implicit government backing to make trillions in loans that wouldn’t have otherwise been made. And there were dozens of other government-created distortions, from rating agencies to the “too big to fail” policy.

Many private bankers and borrowers made foolish decisions: they should have known housing prices cannot go up forever. But today’s crisis could not have reached a fraction of its current proportions were it not for the government’s power to create bubbles and pervert lending practices in the name of some indefinable “public interest.” The basic solution, therefore, is to disentangle and remove the government from the financial and housing markets. This means, for starters, getting rid of the Fed’s power to manipulate interest rates, letting housing prices fall to market levels, dismantling Fannie and Freddie, and ending bailout promises.

Untangling this government mess is not an overnight job, and it is not obvious how best to proceed. It is conceivable that on the way to removing its toxic presence, a repentant government might need to take stopgap financial assistance measures to prevent market-wide catastrophe. The current plans, however, do not seek to dismantle the government’s command-and-control financial apparatus, but to expand it. Observe that Bush’s recent explanation of the causes of the crisis didn’t even mention the Federal Reserve, the Treasury, Fannie Mae or Freddie Mac, let alone give them proper blame. But he did mention them in all his solutions, which give these entities near-dictatorial control over financial markets.

Read the entire article here.

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