CEOS WHO WILL STAND UP FOR FREE MARKETS are as scarce as atheists in fox holes. The seizures of Fannie and Freddie—as well as the bailout of AIG reinforces the trend toward outright state socialism. Investors are looking less at fundamentals and more at government announcements. The idea that these moves are encouraging “stability” is ludicrous, as the once-mighty Lehman Brothers was allowed to fail in between the two massive bailouts.
Ford’s Alan Mullaly deserves commendation for turning bailout money down. Wells Fargo’s Dick Kovacevich initially did the same until he realized the other banks took the money—and who can blame him. The problem goes well beyond the irony of capitalists socializing their losses. “The process is inherently corrupting,” says Larry Reed, president of the Foundation for Economic Education and former chairman of the economics department of Northwood University. “When auto executives testify before Congress, it is not an exercise in truth-telling. If it were they would have said something about Congress’s culpability on CAFE standards and regulatory rules that they face.”The problem with bailouts is, who draws the line? Does everyone have a right to be in business especially if it means taking money from unwilling taxpayers? And what happens when the short-term fix becomes a long-term headache? Government subventions have a way of postponing the day of reckoning when the magnitude of the disaster becomes greater.