On Wall Street, who is paying the piper?

Taxpayers should not be funding corporate mistakes.

Yesterday, members of the House of Representatives shot down a $700 billion Wall Street bailout deal. They made the right decision , or at least a plurality of them did.

Fiscally irresponsible businesses should not be artificially resuscitated.

I have a hard time feeling bad for financial institutions who are struggling because they made risky, and in many cases irresponsible, investments. It’s their prerogative to take risks if they chose, but if those investments don’t pan out they need to take responsibility for the consequences.

Not surprisingly, companies who have been reckless with their money over the past five or ten years are now struggling, flat-out crumbling in fact. That is as it should be. Bad businesses should go out of business. It’s the economic version of natural selection, or Economic Darwinism, if you will.

By bailing out companies who engaged in high-risk behavior, the government is sending a message that other corporations can screw up and taxpayers will just bail them out. We cannot be a society that rewards that kind of behavior. If you’re reckless with your money, eventually you’ll have to pay the piper. I’m not going to pay him for you.

Personal moral objections aside, the bailout is just bad policy.

It’s a simple law of supply and demand that when the market falls, prices will follow. Intervention like this, however, could prevent prices from keeping up (or in this case going down) with the market. And the market won’t recover fast enough to make up for the disparity. So prices will stay the same but we’ll still be hurting from the market’s decline. I think we used to call that stagflation, although this may be a milder case.

I always see a little red flag go up whenever politicians, on either side of the liberal/conservative fence, advocate plans that defy their party’s core beliefs. Republicans, theoretically, believe in smaller government and less interference. So shame on President Bush for acting like such a liberal. It should send up an even larger red flag when a Republican president can’t get members of his own party to support his legislation. That alone is not enough to disprove the quality of the proposal, but in my opinion it warrants a closer look.

America has never been a nation that likes to sit back and watch things happen, but allowing the market to self-correct will be the smoothest solution to this temporary financial crisis.