I had the pleasure of hearing Governor Mark Sanford of South Carolina in Charleston last Saturday address a Cato Institute meeting, where he gave an enthusiastic defense of liberty and called for more citizen involvement to combat Leviathan. He’s an inspiring champion of limited government. In today’s Washington Post, he makes an eloquent case against bailing out those who made bad decisions, letting the market liquidate malinvestments, and learning the lessons from the current financial crisis: “A Bailout for All Our Bad Decisions?”
Last week’s events were rooted in distressed mortgage securities whose optimistic values were facilitated by quasi-governmental entities Fannie Mae and Freddie Mac. The investment banking capital write-downs were turbocharged by the Sarbanes-Oxley Act, which did what too many laws do — it fixed yesterday’s problem. The amazing expansion of credit was fueled by a Federal Reserve offering an easy-money policy that led us right into a credit bubble. All this was made worse by the government enabling some people’s tendency to want more house than they can afford.