A couple weeks ago, CIT Group Inc. found itself on the brink of collapse, pleading that the company was too big to fail. In other words, CIT, like MC Hammer, the Goldman Sachs Group Inc., American International Group Inc. (AIG), and Lehman Brothers Holdings Inc., is too legit to quit.
If Joseph McCarthy was alive and powerful today, I suspect he would be enraged at everyone who has or has had anything to do with financial bailouts. NeoMcCarthies should be wrongfully imprisoning market intervention sympathizers. Instead, the neoMcCarthies are attacking health care reform supporters. Why???
Bailouts of economic powerhouses are exactly the kinds of assaults on free market capitalism that the late Senator McCarthy fought so unethically against! Propping up a financial cartel does serious harm to all banks, businesses, and individuals who are not owners or employees of some part of this this cartel. Furthermore, these bailouts only prolong the inevitable failure of these too-big-to-fail anti-anti-trusts.
Instead of dealing with this real assault on American capitalism, the neoMcCarthies for some reason are choosing to make boobs of themselves using their effective political tactics against popular, beneficial, and characteristically American (and capitalist) health care reform. Financial reform should be incomparably more controversial than health care reform, but for some reason the neoMcCarthies seem to be content spending time and resources making themselves look bad without benefiting many people, including themselves.
If John McCain had voted against the bailout last fall, he might have won the presidential election. If Barack Obama had voted against the bailout, he might have won the presidential election by a greater margin. Although opinion polls at the time showed popular support for the bailout, the situation was abnormally complex. People were afraid of the state of the economy and of the future. Racists, sexists, age-discriminators, and others were afraid of White House candidates. The presidential election was temporally near enough that people had selected a favorite candidate and were echoing that candidates views to make their choice look cooler and more popular. Obama and McCain both supported the bailout, so major-party supporters from both parties were voicing their support for the bailout. I suspect that most of the public support for the 2008 financial system bailout (and most other recent economic bailouts) came from fear and acquiescence response bias.
Arguing for or against (and participating in or protesting) this kind of uncapitalist financial policy is mostly academic and impractical. The times, they are a-changin', as Bob Dylan said, and "the Great Recession" (as we like to euphemize these days) is a bigger force than we can control. Within the decade, CIT, Goldman Sachs, Bear Sterns, and AIG will be as bankrupt as Lehman Brothers, as bankrupt as MC Hammer in 1996, unless these entities radically transform.
Of course CIT has been bailed out - at least this time by bondholders instead of the government. Bailouts can't save anyone though. Substantial changes have to be made, or these companies will run themselves right back to -- and through -- the ground.