Magazine October 20, 2008, Issue

Worse than a Bailout — a Blunder

United States flags fly outside of the New York Stock Exchange. (Lucas Jackson/Reuters)
How not to conduct a government intervention

There are winners and losers every time the government sticks its clumsy fist into financial markets. But we can’t discover who has been helped and who has been hurt by using the word “bailout” indiscriminately.

For shareholders of Bear Stearns, Fannie Mae/Freddie Mac, and AIG, surprise raids by Treasury secretary Hank Paulson and Fed chairman Ben Bernanke were a wipeout, not a bailout. Driving those share prices down to a few dollars (AIG) or a few cents (most others) did not restore confidence among investors who still held other  financial stocks. On the contrary, it made them stampede for the exits.


Alan Reynolds, National Review’s economics editor from 1972 to 1976, is a senior fellow at the Cato Institute and the author of Income and Wealth.

In This Issue


Books, Arts & Manners

Film & TV

Burn before Watching

If you’re the sort of filmgoer who thinks of the Coen brothers as American cinema’s most nihilistic, misanthropic double threat, you’ll find vindication aplenty in Burn after ...



The Latest