This weekend, the Federal Reserve backed a bailout of Bear Stearns to the tune of $30 billion dollars. The deal would allow JP Morgan Chase to acquire Bear for $2 per share. It’s the corporate equivalent of getting a new Porsche for a nickel because some guy cheated on his wife and she seeks revenge through auto sales. It’s nice that Bear won’t go under and take the economy with it, but I’m getting really sick of government bailouts.
I’ve been in debt up to my ears twice in my life. Unfortunately, I wasn’t nearly rich enough for my situation to merit a government bailout. If I’d owned an investment bank, or even a home for that matter, then perhaps I could have benefitted from Washington’s generosity. But no such luck.
Why is your incredible over-reaching in the housing market more deserving of government help than my incredible over-reaching as a credit card funded entrepreneur? The answer? It’s not.
People, businesses, and governments have to take the medicine for their decisions at some point. Putting off the medicine does not erase the problem. If I hadn’t had to dig myself out of massive debt twice I would be a lot less careful how I spend my money now. I learned a lesson I never would have learned if someone had swooped in and wiped the slate clean.
What bailouts teach people is that rash actions have no consequences. Is it heartless to say “let them eat cake?” Not if a person making $40,000 a year can’t manage the mortgage on their $500,000 home. And especially not when a bunch of Ivy League MBA’s drove themselves into a liquidity crunch that they couldn’t get out of.
