Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy

Chapter 14. 2008: Suicide by Democracy

	Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.
	--John Adams

How did the once proudly independent United States become a Bailout Nation?

The first modest government interventions and legislative fixes soon changed to far more insidious corporate welfare. What once was unthinkable slowly morphed into something merely undesirable on its way to becoming the least bad option facing policy makers. The cumulative effect has been a creeping paternalism, rife with moral hazard.

During the debates about earlier bailouts, be they Lockheed in 1971 or Chrysler in 1980, the language and philosophy were very different from the 2008 Troubled Assets Relief Program (TARP) debate. Historically, there was a legitimate battle between ideologies as to whether any bailout should be enacted in a market-based economy. Concern about the negative future ramifications of these bailouts was paramount. The bailout discussion circa 2008 was long on fearmongering and short on substantive issues. Lawmakers were presented with a "Trust me" document, then hardly given a chance to read it. "Vote for this or suffer horrific consequences to the entire financial system" was the administration's approach.

How did this philosophical shift take place? Philosophically, the politics, economics, and financial analysis of bailouts have shifted dramatically since the 1970s. What makes this so ...