Ironically, this huge government action will be solved by free-market auctions and private sector loan workouts that will pay us back. I don't like it, but sometimes you just have to stop the financial fear. When I spoke to Alexander Hamilton last night about this, he told me it was the right thing to do. Like he did in the 1790s.I don't like it either, but I would do it, too. As for Hamilton, it's a bit unfair that he's become a symbol of government intervention in markets. He also knew when not to intervene. When the question was what to do about the fact that many original holders of Revolution-era debt (often veterans) had sold off at steep discounts, Hamilton had the right answer: Nothing. Instead, the U.S. paid the current bondholders, showing not only that the government would honor its debts but also that it wouldn't arbitrarily reset contracts and property rights after the fact.
Wednesday, September 24, 2008
Hamilton on bailouts