The Assault on Free Markets By Peter Schiff
Although the collapse of Bear Stearns would have cost bond holders dearly, the bailout essentially makes them whole. Here again, the Fed creates even greater moral hazards by encouraging excessive risk taking. By bailing out lenders who extend excessive credit, the Fed simply invites more of that behavior. The free market must be allowed to properly price risk. Lenders need to know that when they lend money, whether to highly leveraged investment banks and hedge funds, or to over-stretched homebuyers or credit card users, they risk not getting paid back. By interfering with this process the Fed simply guarantees more losses and even bigger bailouts in the future.
Filed under: Everything Else , bail out, Bears Stearns, bernanke, collapse, dollar, Fed, free market, home owners, homebuyers
