Big, Bad Bailout Sails Through Senate

You had to know it wouldn’t last …

After all, it’s Washington D.C., people, where large groups of politicians going against the grain and taking principled stands have become increasingly rare, if not entirely obsolete occurrences.

Hell, a politician actually standing up for our country’s founding wisdom these days is about as rare as Britney Spears finding her panties.

Yet two days after the U.S. House of Representatives did just that by courageously rejecting a $700 billion taxpayer-funded bailout of Wall Street, the U.S. Senate decided to pour some saccharin on the massive boondoggle.

The result? A 74-25 Senate vote in favor of the bill last night.

Worse still, it appears that the artificial sweeteners which these Senate politicians cleverly stirred into the bill are going to move enough votes in the U.S. House to get it passed into law.

Basically, if twelve Representatives switch sides when the House votes on the bailout again tomorrow, it’s game over, and the government’s plan to clean up the government’s mess with more government will likely become the law of the land.

If that happens, America’s “leaders” will have raised the national debt to $11.4 trillion, trampled on the U.S. Constitution’s “separation of powers” doctrine, approved the largest government intervention in the free market since the Great Depression and - perhaps most disturbing of all - taken another giant leap toward the command economic model that has inched its way deeper and deeper into our “capitalist” country.

Except not even the Russians would have been this stupid …

Here in “conservative” South Carolina, though, the folks over at Lindsey Graham’s campaign headquarters were ecstatic about the Senate’s passage of what they refer to as a “rescue plan,” parroting the doomsday scenarios of government inaction (since when has that been a bad thing?) and trying to put the best spin possible on the all conservative carrots that accompanied this $700 billion interventionist stick.

Nice try, guys.

Seriously, whatever respect we had for Lindsey Graham (and believe us, there wasn’t much of it) prior to this vote has evaporated, because it was obvious that he was going to join “Republican” U.S. Reps. Joe Wilson, Henry Brown and Bob Inglis in voting for the original, “additive free” bailout bill all along.

But Lindsey’s political mouthpieces didn’t stop with nanny state-sponsored pandering, they also took a few shots at U.S. Sen. Jim DeMint, who to his credit stood firm and voted against the bailout.

This isn’t surprising seeing as Graham’s blogger-in-chief Adam Fogle previewed this line of attack a few days ago with a comment he left here on FITS criticizing us for opposing the bailout.

“You seem to have just adopted the Barrett/DeMint ‘plan’ to do a whole lot of bitching while offering absolutely nothing of reasonable substance,” Fogle wrote us.

Interestingly enough, though, our plan all along was to let the free market do its job … well, that and this option.

Because either one is better than resorting to socialism, friends.

In fact, our plan of sticking with capitalism has been echoed by eggheads in, of all places, liberal Harvard Yard - the heart of nanny state activism.

In perhaps the most sensible take on this whole mess we’ve read yet, Harvard economist Jeffrey Miron absolutely nails the correct response to the crisis …

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This “moral hazard” generates enormous distortions in an economy’s allocation of its financial resources.

Of course, in addition to letting the market take its course like Miron says, we would also ban the politically-correct lending practices that spawned this crisis, as well as cut taxes, privatize federal entitlements and pass a Constitutional revenue cap to avoid even bigger crises looming in the future.

Who knows? We might ask for the head of Alfredo Garcia.

And for those of you who think our approach is “dangerous,” Miron also takes direct issue with all the “talk of Armageddon” coming from the lips of politicians like Graham, George Bush, Nancy Pelosi, Barack Obama and John McCain, calling their comments “ridiculous scare-mongering.”

The current credit freeze is likely due to Wall Street’s hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

Exactly … which is why smart people like Miron have figured out where the real danger lies … namely, the bailout plan that just passed.

The costs of the bailout … are almost certainly being understated. The administration’s claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

Truth be told, Bush’s accounting of this disaster is probably just as bad as Fannie and Freddie’s.

Oh well, it’s just $700 billion of your money that’s going to purchase what Michelle Malkin correctly describes as a “crap sandwich.”

And while Washington politicians like Bush, Pelosi, McCain, Obama and Graham certainly rode their alarmist high horses to victory tonight, don’t ever let them fool you into thinking that true conservatives “don’t have a plan.”

We do have a plan. It’s called “capitalism.”

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