For almost 8 of the longest years in history, we have been hearing the Bush administration sing the praises of free and unrestrained markets, while regularly dishing oversight and regulation as pesky and unnecessary.
So who would have guessed that this band of free marketers, headed by our first MBA president, would have presided over the biggest nationalizations of Wall Street firms and financial institutions in history? It turns out that Uncle Sam is Wall Street’s rich uncle.
These ballyhooed years of “let the markets do their thing” are turning out to be the most tumultuous period of economic turmoil and upheaval since the Great Depression.
Big institutions are swooning and dropping like flies. Except that there’s nothing fly-weight about the multi-billion dollar casualties that have been experiencing free falls like nothing in memory.
First it was Bear Stearns in a $30 billion bailout. Bear was “too big to fail” and had too many networked connections throughout the global financial system. Thus, Uncle Sam had to step in.
This, however, did not stop the roiling in the markets. The write-downs and the crises continue unabated.
It is likely, however, that no bailout will be bigger than the one the Treasury Department engineered earlier this month for Fannie Mae and Freddie Mac, the huge mortgage companies.
The government placed the two companies in conservatorship, meaning it essentially took them over, backing them with the full faith and credit of the United States government.
Ridiculously, Treasury Secretary Hank Paulson says he does not know what the ultimate tab will be to U.S. taxpayers who are now on the hook for the rescue of Freddie and Fannie.