The Bailout: A Natural Alternative

I became sick and tired of hearing congressmen saying how much they regretted having to sign the bailout legislation (this includes you, Mitch McConnell) and yet seeing them sign it any way. I know that the bailout is over and done with and has proven entirely ineffective, but I read an article this morning and wanted to spread the knowledge of how capitalism, not nationalization, works.

Reference this article.

When banks, such as Franklin and Security Pacific, take on more risk than their company can handle and continue that business plan, they’re bound to fail. Capitalism punishes bad behavior. That’s how it works. The bailout tries to intervene in this and rewards bad behavior.

Any way, I was happy to see that Franklin Bank and Security Pacific Bank went belly up. I hate it for them because they were relatively small banks and should have been helped by the bailout if larger banks were helped (Read Ron Paul’s Too Big to Fail article). I’m rather tiffed at the bailout, simply because it benefits big business and offers no consolation to smaller businesses. I hate the bailout from an economic standpoint, but when it applies a double standard, come on, that’s just ridiculous. (Please don’t take this paragraph to say that I favor a bailout of small business, either.)

Any way, the thing that made me happy about them going belly up is that capitalism worked in that sense; it punished bad behavior. And, to counter the argument that many politicans had: “What about the deposits held by these failed banks?” Well, capitalism has an answer for that too: Now two more banks, Prosperity Bank and Pacific Western Bank have thousands of new customers! The government does not need to pay for the losses of big companies simply because they are big. Capitalism is very fair and balanced, when unregulated, and would have been able to recover no matter what. Businesses that make bad decisions fail. Suddenly small banks become more prominent. This increases competition and suddenly investors find themselves winning in the long run.

Again, I know that the bailout is over and done with and that we’ve learned that it doesn’t work. However, I feel that any amount of text that supports capitalism rather than socialism is able to offset an equal amount of misconception about how flawed and dangerous free market economies are.