Government Is “Bad”… until “They” need it

Today, the United States Government announced “an extraordinary and historic investment in the nation’s banks – the biggest bet ever made with taxpayer dollars on the U.S. financial system.” (link)

With the announcement that $250 billion in US tax dollars is going directly into nine of the nation’s biggest banks, the stock market immediately rallied, as investors finally had something to hang their hats on:

The reports of the broad details of the plan had sparked the biggest jump in stocks in history on Monday, and that rally continued in Asian and European markets early Tuesday. U.S. stocks were also sharply higher in early trading following the announcement.

When the government tried last week to right the ship by lowering interest rates and having President Bush hold a press conference to say things were going to be OK, the Dow continued to plunge. It was only when the government – yes, the big, bad government – actually stepped in and did something did investor confidence come back to life.

One other interesting note from today’s feverish news: part of the deal is that with this infusion of cash, the US government is stipulating limits on executive pay.

So there you have it. Those, who until the recent financial crisis exploded, were the leading hustlers for deregulation, tax cuts and a reduced role for government, have suddenly changed their tune. Once upon a time, they denounced the need for a functioning social safety net for working families and market regulation to protect consumers and investors. But today they are frantically pleading for a huge government safety net to rescue investment banks. Conservative rhetoric has been mugged by reality.

This Wall Street mess is teaching many hard lessons. One thing is clear. It’s high time to start an honest conversation about taxation, regulation, and government’s proper role in society.


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