Financial "Rescue" Plan

Like most American's, I've been trying to wrap my head around the happenings in the financial markets and the government intervention. At first, I felt that something needed to be done to prevent a complete market crisis; however, now I'm starting to feel otherwise. Since I have this blog, I thought I'd post my thoughts and be done with it. I'm going to try to avoid discussing all the crazy politics that have been going on around this issue, but focus instead on the key issues.

First, I am a capitalist. I have studied the markets, I understand the fundamentals behind the markets, and I believe the markets work best when LEFT ALONE. People will argue that the markets didn't work in this situation. In fact, Iran's President, Mahmoud Ahmadinejad, said, "There are some who believe we can improve the economic situation with the formulas that are prescribed by the West; they must know that capitalist systems are falling apart." However, the reason the markets didn't work in this situation was too much governmental manipulation in the past. Companies come and go - markets go up and down. It's normal. An example is in business with statistical quality control charts. A product is measured as acceptable within a range above and below a certain line. Until it falls out of that range, does intervention need to happen. Government has regularly and repeatedly intervened when data isn't exactly on the line, but not out of range.

Second, I am not comfortable with government operating in a business interest, whether that be an investment bank, or these quasi-business ventures such as Fannie and Freddie. That's what caused the problem in the first place. Everyone knew that the government would ultimately bail them out. Under Paulson's plan, eventually the government might make a lot of money on these purchased assets. However, do you think we'll ever see any of that in reduced taxes? Probably not.
Government accounting is done almost backwards from normal business accounting. They estimate their "revenues" from the various sources (usually mostly tax) and then they calculate their appropriations, or budgets. I believe the government will be subject the same mistakes the financial institutions have made, by GUESSING what they think these assets will generate in future years and spend the money before they generate it, on new programs such as nationalized healthcare, etc... If the money doesn't come in, we're now even worse off...

Third, this may sound bad, but I believe, and have believed for some time, that the economy and government needs a "reset". After the stock market crash of 1929 and the Great Depression, Secretary of the Treasury, Andrew Mellon advised President Hoover that shock treatment would be the best response: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.... That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." Hoover rejected this advice and started other programs to end the Depression, all of which failed. The market collapse was inevitable and while the liquidation may have made an immediate negative effect, it may have done what it was intended to do. Ultimately, the Depression was turned around by a combined effort of many things. A war, the New Deal, other programs; however, the people did have a value adjustment. Conservation and rationing were now a reality. Then the people could rebuild.
Now days, with credit card debt, mortgage problems, and the general welfare state we exist in, I believe the country could use a value adjustment.

One final thought. Congress rarely gets things right. Especially this Congress. So, why do we feel that we can trust them to handle this deal correctly in such a short period of time? The Republicans have offered other plans, so at least someone is thinking up there.