Go for broke, but be prepared to be broken.Bailout no, Bankruptcy yes.
Interesting point of Jeffrey A. Miron. Jeffrey A. Miron is senior lecturer in economics at Harvard University. A Libertarian, he was one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan:
Congress has balked at the Bush administration’s proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the “troubled assets” of financial institutions in an attempt to avoid economic meltdown.
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
