Andrew Leonard in Slate posts about the comments Federal Reserve chairman Ben Bernanke made to Congress this morning. In it, Bernanke made fairly dire remarks about the economy as a whole and the Bear Stearns situation in particular. I'll let you read that for yourself; it's basic confirmation that the Fed felt Bear Stearns might bring down a good portion of our financial structure, so had to put up taxpayer money to guarantee that wouldn't happen. I admit to mixed feelings about this decision, so I'll talk about something else.
The Chairman says, "Normally, the market sorts out which companies survive and which fail, and that is as it should be."
Of course, this is nonsense. We see example after example of government structures, laws, and institutions being used to "help" companies survive. Take United Airlines...please. Chapter 11 allowed them to stiff shareholders, offload their pensions, and emerge financially secure (if no better operationally) than before. Their executives came out better than whole, but it's by no means certain that the overall economy is better off for propping up this wretched airline.
The Chairman says, "Normally, the market sorts out which companies survive and which fail, and that is as it should be."
Of course, this is nonsense. We see example after example of government structures, laws, and institutions being used to "help" companies survive. Take United Airlines...please. Chapter 11 allowed them to stiff shareholders, offload their pensions, and emerge financially secure (if no better operationally) than before. Their executives came out better than whole, but it's by no means certain that the overall economy is better off for propping up this wretched airline.
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