What FEMA and the Fed Have in Common
I was in the National Press Club lobby this afternoon when the news broke that the House had failed to pass the bail-out package. I sat there staring at the wall of TV monitors with a group of stunned reporters, no one sure what to do next. One screen showed the Congressional vote tally going up; the one next to it showed the Dow going down, down, down.
Despite the sense of foreboding in my office here in DC, I am still not convinced the bail-out package was the right response. The whole thing reminds me too much of how we deal with other disasters in this country: we encourage people to take enormous risks by, say, living without meaningfully priced insurance in places like Florida, and then we bail (some of) them out with disaster relief after catastrophe strikes.
I don’t pretend to have the solution, but I am struck by the question posed by Luigi Zingales, an economist at the University of Chicago:
Do we want to live in a system where profits are private, but losses are socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held responsible for their decisions, where imprudent behavior is penalized and prudent behavior rewarded?
The question is, can we hold people responsible for reckless behavior while not penalizing the rest of the country at the same time? Can we have accountability without a depression?