Economists Send Open Letter to Congress Opposing Wall Street Bailout

Business Wire, Sept 26, 2008

Leading economists from around the country oppose the bailout

WASHINGTON -- FreedomWorks Foundation released today an economists' Open Letter to Congress, opposing a $700 billion bailout of the financial services sector. Clearly, the market has been in turmoil, but authorizing the U.S. Treasury to purchase $700 billion in troubled assets from failing financial institutions poses a real threat to taxpayers without any guarantees that any necessary reforms of the troubled markets will actually occur.

The letter notes: "Many of the troubles in today's market are the result of past government policies (especially in the housing sector) exacerbated by loose monetary policy. Congress has been reluctant to reform the government sponsored enterprises that lie at the heart of today's troubled markets, and there is little to suggest the necessary reforms will be implemented in the wake of a bailout. Taxpayers should be wary of such an approach."

The letter continues: "In addition to the moral hazard inherent in the proposal, the plan makes it difficult to move resources to more highly valued uses. Successful firms that may have been in a position to acquire troubled firms would no longer have a market advantage allowing them to do so; instead, entities that were struggling would now be shored up and competing on equal footing with their more efficient competitors."

FreedomWorks President Matt Kibbe commented, "This is an important time in American history. Taxpayers are being asked to shoulder $700 billion in new government spending as Congress socializes the losses of Wall Street. Taxpayers did not enjoy any special revenues during the fat years, but now are called upon to bear the burden in lean times. That is a bad deal for the taxpayer, and it is not obvious that it will generate the fundamental reforms needed to avoid a repeat of this problem. In essence, the proposed bailout is forcing taxpayers to buy piles of junk assets with borrowed money. This borrowing is passing the buck onto future generations. We are going to take loans to bail out Wall Street backed by the future earnings of our children."

To view the letter and see all signatories, please click here (www.freedomworks.org/informed/issues_template.php?issue_id=3028).